Starting a hedge fund

Discussion in 'Professional Trading' started by G_Morgan, Feb 10, 2004.

  1. Hello,

    I have plans to start a mutli-manager multi-style hedge fund. I am in the process of writing the business plan... operations, trading stats, etc etc.

    However, I have a question: How do I get capital for management? The fund will require several million in order to properly diversify and trade with acceptable commisions.

    Thanks,
    Morgan
     
  2. marketsurfer

    marketsurfer Sponsor



    10 million is the bare minimum to properly operate a hedge fund and expect to earn a living. your initial capital is obtained from your personal contacts/ friends.

    best wishes to you,

    surfer
     
  3. It has been my experience that individuals who start Funds-of-Funds have two primary skills: raising capital and (to a lesser extent) assembling portfolios.

    jj
     
  4. Surf,

    I have no rich personal contacts or friends. If I did, I'm not sure I would feel comfortable managing much of their money... I mean, 5% or so would be ok, but not much more. Not that I am not confident - just cautious.

    As for earning a living, I'm not very concerned with that. I'm sure that after a few years the fund track record would be enough to bring in lots of capital... no?

    ---------------------------

    jj,

    That's unfortunate. I hate the finance industry :(. So many inefficiencies!
     
  5. marketsurfer

    marketsurfer Sponsor



    sure, several years of track record will be great. however the track record needs to be with a substantial ( for an individual ) amount of capital, for anyone to take notice.

    best wishes,

    surfer
     
  6. I think you might have missed the point. If you think you can trade but don't know how to raise capital (which is the impression I get from your posts), you would be better suited to starting a long/short fund and hiring a marketing firm to raise funds for you (or engaging a seed firm). If, on the other hand, you can raise capital but don't necessarily know how to trade, then the best plan is to start a fund-of-funds.

    Best of luck!
    jj
     
  7. What are the legal forms of marketing for a hedge fund?
     
  8. qtip

    qtip

    JJ,

    I am familiar with Hedge Firms and Managed Accounts, but can you go into a little more detail of how Fund of Funds work. From you description, you don't have to be a trader, but a very marketer and sales person. Thanks in advance!

    Sincerely,

    Qtip :)
     
  9. A fund of funds is a hedge fund that allocates its capital to other funds instead of trading it outright. As you would expect, being a good trader is not as important to a FoF manager as being able to raise capital, evaluate managers, and construct a portfolio.

    jj
     
  10. marketsurfer

    marketsurfer Sponsor


    see www.hedgeworld.com and www.marhedge.com these guys should be able to clarify some things for you.

    surfer
     
    #10     Feb 10, 2004