yeah, Rufus, that makes the most sense - it is an auction game. people are willing to do more and more for less and less. as a member mentioned, even if you have a $1m or $5m trading account, no way you can make $2m just for showing up (2% manager fee). and if you have a $1b fund, your cut is $20m on Jan. 1st. well, I'm just gonna have to think things over, because I know how rich people always think they got the advantage but in the market, things equal out. so let them lose their money having traders with inferior systems trade it. after all, there's no guarantees for investors subscribing to a hedge fund. I know one thing - I'd NEVER - NEVER NEVER NEVER give some rich sonovabitches more than 10% a year - NEVER. Even if I could make 500%. that would be a sin. others want to do that, they can go for it. I have principles. yeah, so sure, I'll take 2% and as much of the profit as I can (with supply/demand, more money should go to the better consistent traders) for farting around in the forex at the tune of 10% a year. yeah, no problemo, assay. theskalper
Just an FYI, a 2/20 split is 2% of Assets and 20% of new High Water Mark. This is fairly common industry standard.
I wouldn't call $100 million nothing. Capital is always capital. Haven't you heard sKaLpz: How do you make a small fortune in trading? Start with a large one.
which brings me to my next point, Gentlemen. I am not even IN the HF industry yet I already see changes that need to be made. A couple of them I am keeping under my hat at this point because if I never even am able to get a HF then none of my proposals matter. I think Rufus indicated to me that my proposal for a money-running set-up would not work because no one would want to invest but... here it is anyway (in bare basic form). 1. do away with the 2/20 structure. 2. base pay/% closer to Alfred Winslow Jones' (the original HF guy) original structure that, in a nutshell, was more performance-based. so lean the manager's pay more towards performance then reward that performance better. 3. this is pretty simple: A). The first 25% profit (that is the "conservative target") belongs to the investors. B). Everything after that is the manager's pay. C). Expenses are always taken out of the account money BUT there is no set 2/20 so it is a clean 25% for investors. That matters more than many may think, because for an investor to get 25% BUT have it chewed to pieces by expenses, 2% fee, highwater marks of 20%+++, the investors don't ever really know what they're going to make. D). Two-year Lock-up period is MANDATORY. Why? Because there's nothing worse than piquancy investors redeeming their money at every slight market down turn. THAT is why they are "investors" and not traders because they do NOT have the temperament for it, whether they admit that or not - the market EATS "well-healed" highly educated rich guys. So when they lock up money for two years they KNOW they are committed for the longer haul. It also gives the money manager more 'breathing room' to target larger time frame trades for profit. That would net investors 12.5%/yr. E). If the profit target of 25% is NOT met, then the manager should get 5% management fee (he has to earn something!) plus a hefty split of profits of what IS earned: MORE than 20% of the HWM. Of course, audit, legal and operating expenses still get paid out of the account in addition to the manager's pay. That would be the bare minimum terms upon which I would trade public money in a hedge fund no matter how much money in the account. Because, after all, without hard-core, successful traders to trade it for them, all the investors' money in the world is worthless. Traders can always trade their OWN private money - but investors... if they try to access the markets... will end up giving their money to the real traders. That's why they need managers to trade it in the first place it.
maybe you want to work for peanuts - I don't. and I won't. overall, though, the proposal above is presuming that the manager/trader is a Competent Trader and highly accomplished. of course, this greater pay rate / profit split would not be for the 95% of mediocre HF managers out there that poke along to eek out profits and narrowly beat relative benchmarks, i.e., guys from the mutual fund industry. I think most "traders" in the 8,000 HFs out there should not even be trading. they are just watering down the fees / profit splits for real traders. fx
I do both. I trade my own funds, and private money at the same time. No need to give up one for the other. Just a matter of separate order entries.
right on! that's the solution! so, in essense you ARE using the public's money to your advantage because what you get in fees and splits you can trade in your own account and keep 100% of those profits. that's what Steven A. Cohen does I think I read. It's basically a cash cow with zero risk because it's not your own money in the funds. so how's that working out for you?