KTM- Amazing how the posts in this forum digressed from your original post. I tried to email you with name of an accounting firm that specialize in the creation of hedge funds and could easily answer all of your "back office" questions but your email address is restricted. If you are interested please send me an email and I'll forward the info to you.
Trading forex- Just some observations and clarifications. Many ways one can trade forex. If you have 250K or more, you can get leverage as well as a very tight spread from the largest inter-bank forex dealer in the world. Smaller accounts should consider a firm such as Refco, leverage, tight markets and above all-an established, reputable firm. Some of the online firms may be the "wave of the future" but for the time being, there are too may pitfalls not to go with a large firm. I personally know of several traders (friends-not 3rd party rumors) who fell victim to one of the "cutting edge" online forex trading firms that blew up. Futures are another viable alternative. If you plan on daytrading forex, your best bet for liquidity and volatility is usd/jpy. While forex is a 24 hour market, like any other market, trading is not uniformly good 24 hours a day. So trade opportunities are not as unlimited as they are purported to be. Starting a hedge fund - If you need someone to point out the obvious considerations in starting a fund you're not in the game. If you need to lecture and or preach on the virtues of a prop firm vs. a hedge fund - wake up. The traders qualified to start a "real" hedge fund are much further along the learning curve than the prop. firm trader. Most come with serious sell-side qualifications and skill sets. They are not just order flow traders either but proven idea generators. Many receive substantial funding for such ventures through contacts cultivated at their former employers in addition to investing substantial sums of their own capital. Former clients invest with these funds because they generally have a relationship with the trader / portfolio manager who is launching the fund and IT HAS BEEN A PROFITABLE RELATIONSHIP FOR ALL PARTIES. BTW- a fund would never be considered by a legitimate prime broker who offers among other services, capital introduction, without a significant capital commitment from the individual(s) running the fund. Here is a thought for the prop. shop pros. When was the last time you had a trader at your firm employing a convertible arb strategy???
Bond Trader, There's nothing wrong with a hedge fund if that's what you want to do. Our clearing firm has hundreds of Hedge Funds and I would be glad to help anyone set up a fund providing they have the capital, experience fund docs set up properly. If anyone wants to start a hedge fund, I would be glad to help, please contact me. At Lieber & Weissman , we are primarily daytraders, but we do some risk arb, intermarket spreads , Conversions and ECN arbitrage. Most daytraders make their money daytrading stocks and that's what our firm does. If you are set up as an arbitrage firm-you make your money doing arbitrage, if you are a Market Maker-you make your money making markets etc. I can't say that any type of trading is better than the other. The type of trading you do depends on many factors , including your margin setup , capital & experience. Convertible arbitrage might be a strategy to consider if you are a well capitalized hedge fund. Be aware that profits in any kind of interest rate arbitrage are "thin" and strategies you may employ in a hedge fund may not be suited to individual traders, so that is why our traders do not do "convertible arbitrage" . Gene Weissman Lieber & Weissman Sec., L.L.C. gweissman@stocktrade.net
Sorry Mr. Weissman, But my post was not directed at you but rather at the person who can not think of "a legitimate reason" for starting a hedge fund. Hint - to make $$$$$$$$$$$$$. Isn't that why we trade?
also, prop firms do not put on ted spreads, crush sppreads, crack spreads, reverse crush i think you get the idea. i disagree with the notion that people who ask why they should start a hf should not be getting into them, how is one suppose to learn without asking? granted, this type of forum may not be the ideal setting, but it is a setting nonetheless. just some commments
Since that was "directed at me"...I will make another simple comment. I think you can make money by starting a hedge fund...and since you can, why not go ahead and do it. "Just do it!" - I wish you the best, and I hope your investors make money too. I have never said that that the person starting one cannot make money. There are many ways to make money in this business. My original comment was intended to ask the question "why would a good trader choose to give away most of their profits to investors" -? Not that you wouldn't be making money in the first place. Anyway, good luck...keep us posted on your progress!!
Don Bright wrote: "why would a good trader choose to give away most of their profits to investors" If the assumption is that a hedge fund manager is good, then it follows that the hedge fund manager is making a profit. So, in that case, the hedge fund manager is making 20% of profit made on other people's money that he or she would never have a chance to make if not for the leverage that managing other's money affords. That, to me, sounds like manager is *actually* taking profits as opposed to "giving away" profits. In addition, the trader or manager actually gets to keep profits made on his or her money too. Can you explain how a hedge fund manager who is a good trader is giving away profits?
I am really not trying to continue a confrontation, but to answer your question.....if you trade with a few million every day, and make money, wouldn't it make sense to trade where you can keep all the money rather than have to split it with the investors. As you are well aware, our traders (and those of other firms) can do that. That is all I meant....
Ok, Don, You say a "few million". When you start out a hedge fund. You can trade 500 million dollars and more. Can I trade 500 million with your firm ? Even if that would be possible, the liquidity is not big enough to get in fast and out fast.