Returns Before Hedge Fund

Is it common for hedge fund managers to include their personal trading records before their hedge fund was formed? Are such records looked upon with skepticism?

 

no


yes


best,

surfer

 

My accountant told me not to mention my past records. He said it wasn't even worth auditing them. They don't matter to anyone but the IRS.

 

Depends on where you are raising capital from ...

 

If, and I repreat IF, you have a past trading record that is 1) AUDITED (not by arthur anderson), and 2) you have been trading from a single account with a substantial amount of funds (ie. $500,000 or more), and 3) you have CONSISTENT results over a PERIOD of years (ie 5 or more),

then YES, your personal trading history is VERY relevant, and definitely should be used to raise funds. And this makes perfect sense. Potential investors would like to know your trading history, as it relates to you managing money in a fund.

JJ

 

Sure, it's fine if the program (with no deviations) used to achieve those personal returns is exactly the same one that will be used by the Fund.


Otherwise they're irrelevant and dishonest.

But either way it should be plainly spelled out in the "Risk Factors" section of your OM that this fund "Has no operating history."


Regards,
Dr. Zhivodka

 

"Sure, it's fine if the program (with no deviations) used to achieve those personal returns is exactly the same one that will be used by the Fund."

Yes, I forgot to add this important part. The trading style needs to remain the same for past returns to be relevant.

 

I don't understand why the manager's trading records before the fund are so irrelevant.

Those records shouldn't be the basis for entering the fund nor should they be a guarantee of the fund's future success, but still, if I were entering into a relatively new fund, I would feel better knowing the manager was successful as an independent trader. As a matter of fact, I would want to know the manager's history of trading if at all possible.

Given that most manager's traded before their fund was formed, I would think the their personal records are very important. After all, if they weren't successful on their own, they shouldn't be managing money for others, no?

 

My accountant said that it was because of legal reasons that you shouldn't include much about past returns. It would also involve an audit (expensive if you are like me and used your trading account for a checking account as well. I have 100+ accounting periods over a 3 year period).

 

Are you starting a fund, Corso? Or are you evaluating a manager that has included his personal trading record?