I was complimenting you on doing this during the day and holding another job at the same time. I hope I didn't offend you. I was serious in my statement "you are what makes this country great."
It's all about what options the prospective clients will likely have. The fact that they are looking for a manager suggests that they aren't interested in actively trading for themselves. From his previous comments I'm assuming he deals with ETFs and futures that likely have a very high correlation to the S&P 500. Given that his clients don't have any skills and are seeking out a manger who deals in things highly correlated to the broader US indices, it isn't at all unreasonable to use a positive S&P 500 return as a hurdle rate. Because if they were doing it on their own, that is what performance most of them would be getting, and they wouldn't be paying a dime for it. My program has a beta of 0.05 when compared to SPX, but almost all of my clients compare my returns to either SPX or the DOW when discussing it with me. Managed accounts are generally comprised of risk capital that would otherwise be invested in equities or some type of mutual fund. That is just the reality of it. What I was trying to suggest was that it is not a significant concern when considering whether to sign on to a managed account program.
thanks for the compliment. trading to me is online poker. no stress at all. i thoroughly enjoy doing it. i will do it for free. njrookie
I've a question for people trading friends and family account via IB (or any other small managed account) Sorry if I'm a bit away from the raising money subject but I think it's something you need to think about when raising FF money. Let's assume that you have a strategy trading 1 lot ES future per 200K$ of capital. If someone gives you 100K$ to manage you will not be able to trade that strategy and respect the risk initially defined for that strategy. That's assuming that you have a trade allocation per account after you trade (and not 1 global account where you accumulate the capital from FF) How did you / would you cope with that situation? - ask for a minimum investment of 200K? - trade others product with less leverage? (SPY) ~ not ideal any other suggestions? cheers
My guess is that you would need 200k or that individual should be well aware he has much more risk than your other accounts.
It is referred to as notional trading. They have only deposited $100K but you'll be trading it at a level of $200K. They must be well informed that they will experience 2X the risk of a typical account. You must also be very honest regarding the chances of a margin call, depending on the strategy. While the PnL is simply 2X normal, the chances of margin call for certain strategies increases significantly with increased leverage.