You know Self, A very smart guy used to tell me: "You're only as good as you are, not as good you think you are."
My point was that you don't need all that high of return to attract AUM. You need decent, consistent returns with controlled drawdowns. It's easy to make good returns when the Fed is goosing the market. Take that away and becomes a whole new ball game. (The Fed has been pumping the market for 40 years. Interest rates have fallen from 20% to 0%. And look at the trouble it has caused in the US... $30T in debt and high inflation.) You may never see such benign market conditions again over extended time in your lifetime.... But that's good. This will be your time to shine as everyone else will be facing the same market conditions. As always, "the cream will rise to the top". Your audited track record will be your big attractant. Good Luck!
Exactly. I don't agree with this but that's a whole different topic which needs a new place (and time)
Yes, I am not a slave from my money. I decide myself how I want to live, and when I want to trade or not. I never dreamed about becoming the richest man on earth.
Most of the answers in this thread do not answer your question... Robert Morse gave you some valid pieces of advice, pretty much anything else that was said is not useful. The poster can set up a hedge fund, if he wants, depending where he is resident (US or elsewhere) the regulations and the cost of doing such a set up will change and the poster has to find the relevant info and understand in deep what he is about to do, otherwise he will be out of business before he even starts. A hedge fund is not a business "about having a bigger platform to do some good and help people" or " to be the first billionaire hedge fund CIO who donates 10% of his net profit to "small communities" in need". These are irrelevant thoughts when it comes to thinking how to set up a hedge fund and make it work. If the fund is successful, then, later on, there will be plenty of time to think "how to spend the money" or who to gift that money to. And let me add that saying: "I expect to beat Simons' ROC track record", when the first post is saying: "how do I set up a hedge fund?" is a HUGE RED FLAG, because it shows a complete ignorance of the business and its players. I think it's going to be pretty hard to run a fund that beats Jim Simon's fund, considering they ran AUMs north of 50-60 B USD with annual returns that are never been seen on 99.9999999999999999999% of retail traders accounts. Plus, if one spends just a couple of minutes reflecting on the number of people working at RenTec, their qualifications and talent, and the amount of complexity they deal with to achieve what they do every year, it should become evident that is going to be VERY HARD to replicate what they do on the scale they do it. All this said, one can do an hedge fund from scratch.... it has a cost.... and you need to raise some capital from clients... and it can be any clients, so if the question is "can I do that?", for sure you can. But you have to make sure the goal is clear: a fund is a vehicle to allow a number of investors to give you their money so you can make decent returns for them. All the numbers presented by the posters in this forum are irrelevant because not all investors are the same, I know people largely invested in hedge funds that return 3% a year, but they are happy because these returns are UNCORRELATED to other investments they have. Other people are invested in funds that have much higher returns but their investments are more speculative and riskier, like a rollercoaster. In the end the beauty of a hedge fund is that it is like any other business: if you can find your customers niche, and scale the business up to a point where it is worth it to run it that way, rather than trade your small/medium or large account, then it could make sense to launch a fund. A 100M USD fund that returns 10% a year will give you 4M USD a year in gross fees at 2/20, to make the same money with a smaller account you will need to generate MUCH LARGER returns and they usually come with more risk: 8M AUM *50% yearly returns = 4M USD a year Can you make 50% returns a year, every year, trading an 8M USD account? Do you have 8M USD? If you have that money why bother trading at all? Put it in bonds or real estate and you can have relatively safe income without any stress. These are the questions you have to ask yourself before starting a hedge fund... it's an equation with a number of variables, you cannot treat it lightly.
It's my impression that unless you a) have a verified track record showing good results over an extended period of time and/or b) Are well connected in the industry and/or have the right academic background it's going to be very hard for you to have someone invest in you. Of course there's the guy with a rich wife here on the boards who gave him some money to manage or maybe someone have a rich uncle with money to spend... So, for the retail trader who goes all the way and establishes that track record trading his own money with good or even great results he may not see the reason to want to manage money anyhow - making it a bit of a catch 22 situation. I don't think launching a hedge fund is that complicated. You simply need investors. That's the tricky part. I know a guy in Norway who launched a fund recently. Little to none actual experience with trading and the results have been below par so far, but I'll credit him for actually keeping drawdowns under control. I imagine he was able to raise that money after a long career as a stock broker (salesman) and being well connected and having many people believe he could actually trade as well.
If you have US clients you need to comply with what the CFTC and NFA ask. I know from personal experience that this can be a HUGE problem. US clients means (which is not mentioned in this thread I think): disclosure documents have to be approved you need a compliance officer registration as CTA so first succeed in Series 3 exam (if my memory is still good) CFTC can be a pain in the a**. I can tell you a small story about what happened when I send the disclosure document from the fund I started. A few weeks after sending the documents to the CFTC I received a letter with a long list of remarks. Many really stupid things like "sentences should be rewritten in another way", at position X a comma is required, etc... What makes their remarks so stupid was that the disclosure document was an exact copy of the disclosure document from "Colorado Commodities". And they had no problem for all the years they used it. The only thing that was different was the identity of the fund and some names of individuals involved in the fund. The performance of the fund was also replaced by our own numbers. How can the CFTC have two complete different reactions on two identical disclosure documents? I gave up to work for US clients and my problem was solved. After about 1 year I made enough money to trade only my own money and closed the fund. No administration anymore, no costs anymore, no clients that call you all the time anymore, etc... And I was free to trade when I wanted and could take holidays like I wished. I also did not have to explain ti clinets anymore why I did this and not that... I will never ever open a fund again.
You're right. I don't think these requirements exist in Norway. So, for a US citizen you to both meet the necessary regulatory requirements AND you need investors like I outlined earlier. Marty Schwartz featured in PitBull also started managing money after being a successful individual trader, but I don't think it was a positive experience for him. I'm not sure how much of an influence having more money to manage was, but I remember him mentioning the external pressure from investors as being a major headache. Curious. Why did you open a fund to begin with and how did you get investors? I mean. Did you have a track record at that point? I imagine your motivation was to gain even bigger returns collecting management fees and returns on a larger capital base?