Running a hedge fund is tougher than you think

Discussion in 'Professional Trading' started by mickson, Mar 24, 2008.

  1. mickson


    Hi, I recently joined this site and have spent a couple of hours reading the various threads with interest.

    My story has all the ups and downs to fill a best seller, but most importantly I feel my story is just beginning.

    I have been running a hedge fund or managing a trading account for wealthy investors for more than 5 years with varied success.

    I am very proud of my actual trading track record but what I have found to be more important is to earn sufficient fees to cover the management companies expenses.

    I often say to my wife I don't know how I am still in the game, with all the obstacles we have had to overcome.

    So here is some advice for a hedge fund startup or a trader who is trading for a living. I will leave all the personality criteria such as resilience and confidence and a whole lot more out of this equation.

    You need capital, and I mean more than 3 months worth of working capital. You probably need about 3 years worth of working capital assuming small fees/profits from your second or third year.

    This isn't to say that you cannot be hugely successful from the beginning, but you will probably be just a case of random luck.

    I believe this is the greatest job in the world, the stresses at times seem unbearable but you come back and work through the difficulties and then suddenly things work according to plan and you are hooked all over again, and so the cycle continues.

    I have staff, I have pretty big expenses, I am a family man with kids in private tuition, I moved countries 3 months ago, and now operate from home while my team continues operating out of another country.

    After 5 years of blood sweat and tears, I feel like I am on the cusp of something big, but then I check our bank balances, and the personal loans sitting on our balance sheet and I get this sinking feeling. (Probably didn't help that we lost money today)

    Thank goodness the payoff profile is so large if one is able to succeed in this business.

    Good luck out there, if you believe you have something special and you are on the journey, never give up.:)
  2. Its all about survival and luck!
  3. Brandonf

    Brandonf ET Sponsor

    One thing I have seen people get into trouble with is neglecting the business aspect of running a hedge fund. When your trading for yourself it should also be treated as a business, but its nothing near the scale of running even a modestly sized managment company.
  4. How much money are you managing?
  5. Now that's an honest post through-and-through ... yikes!

    Man, that pot-o-gold had better come around for all of us. :D
  6. I call it the aggrevation factor and unless you're managing $100MM+ why bother?
  7. mickson


    I have been managing around $50m in a niche strategy that has capacity constraints and cannot get any bigger due to the size of the market. However, I ran into regulatory issues a number of years ago over a trade that was deemed manipulative, and was forced to return the cash under management.

    I was down but not out and refused to give up because of a technicality that I never understood.

    I then embarked on another strategy and spent the last 3 years researching it, fortunately with working capital I raised from my original backers, who continued to believe in me and my team.

    We launched the fund in Dec 07' with $1.1m of our own money with the intention to trade it for 12 months before we open it to 3rd party investors.

    So my journey started off well but hit some major snags which I am hopefully successfully navigating. One thing is for sure I will never give up, but I am also a realist, I am not going to lose everything because I blindly believe I am destined to succeed.

  8. mickson


    I should add, this time I made sure our fund has scale capacity, we can easily get to $1 billion if the performance is right.

    The size of the AUM is also a factor of what your expenses are, and we would easily break even with $50m so "I would bother".

  9. Send me a PM if your interested in "smoothing" out. My ES methods are good up to 2000 contracts per trade.
  10. You really are a dickhead Hobbs this bloke has probably forgotten more about trading than you will ever know and you have the gall to state that.

    If I am over aggressive I apoloigize but I am sitting here having green crap squirted under my tongue unable to swallow and its making me mad and i have another 5 hours of it to come!!!
    #10     Apr 6, 2008