Start-Up Hedge Fund Question

Sorry meant to add that I agree the Managed Accounts does have its limitations on the ramp up of accounts.

 

I should have clarified that you only need a series 3 if you want to trade futures and options (like I do). but its a good thing to have, you should get it anyway, even if you don't need it now, you might want to trade those in the future for your fund.

 

Assuming you can handle fund accounting yourself, 30K is the bare minimum for startup costs. 60-70K is more realistic. Licensing is different from state to state but with the way the hedge fund regulation is going, a Series 65, like CA, will soon be the requirement. If you don't plan to market/advertise your fund, hold yourself out as investment advisor, and have less than a dozen clients, you can argue that you don't need licensing. If you're going to actively trade your own account along side your clients or fund, you better have clear trading/allocation/compliance policies and good lawyers. You'll need them especially when your account is up 200% vs. -30% for the clients.

 

Hate when that happens.

 

One question-- to protect again reverse engineering, can you hide your trades from your clients and just have TS report to them their equity curve / daily account balances?

Thanks,
-Taric

 

Good question and under that scenario (Managed Accounts) the ans is no ..... I understand your point completely .....

 

yes, you COULD spend $70 K, but you can easily do it for less. Here is a quick breakdown of the costs I have paid:

lawyers fees $7000
3 Florida company registrations $3000
NFA $1000
miscellaneous so far $1000
offering memorandum materials $1000

running total to date around $13,000

first year audit anticipated cost approx. $15,000

I will do the accounting myself the first year

anticipated first year costs around $30,000 total

the big difference is in legal fees, I got a great job done for $7000, but you can pay MUCH MORE for this if you go to certain places to get the work done

 

I too said it could be done for 30K. Heck, if you use Prepaid Legal Svc. , HR Block, and run the fund out of your apt, you probably can put the whole thing on your Amex. With 500K and 1 customer, the easiest way to generate income without all the hassles is having the customer giving you trading autho. on his acct. and a profit sharing agreement

 

Hi,

I am interested in what makes you confident to take this path of setting up your own hedge fund. Do you have a track record? Do you trade mainly equities or futures/options and do you intend to trade foreign markets or currencies. Also, are you trading a system and is this system automated?

Thanks

 

I have a personal trading track record, each trade I have ever made has been documented, but not audited. I trade index futures. I have a set system, but its not automated, I have to enter the trades. The fund will only trade the systems I can scale up sufficiently enough for a fund.