Who cares. Money has no smell - a dollar is a dollar, regardless of who it comes from. If you can raise a few mill, and can trade, then you can run a hedge fund. The rest will be down to how well you do from there on. PhD/quant = short gamma and/or easily replicable edge (by anyone else with quant skills) = eventual blowup or degredation of returns. The perpetual edges are all non-quantifiable, by definition.
In my personal account I did triple digits for 2 consecutive years then did the fund. I don't think I can talk specifically about the returns of the fund w/o perhaps breaking some sort of law so I'm going to err on the side of caution and say my returns in the fund have been less than in my own account with fairly mild drawdowns. I'm never looking to deliver eye popping returns, just slow, steady, and consistent.
The CFTC's De Minimis exclusion is 400k and up to 15 people, not including family members. Most states follow these guidelines. California is a little tricky. Before I became registered I did not accept any investors from California because they live in their own world out there. Once you're registered it's not a problem.
Great thread, Couple of questions: 1. What entity type did you choose for your Mgmnt co. & the fund itself (corp, LLC., etc.)?? 2. What fee structure did you choose...2/20???
Very interesting.. your comment on NOT placing a physical stop. Can you explain your reasoning? How will you handle an onsite power loss or major catastrophy, if LONG? Thank you for starting a wonderful thread.. the insightful comments are clear +concise!
I did an LLC, which manages the LP. I think you can do an LLLP that covers both of these bases with one entity. I do a 1% and a sliding scale % of profits, which starts at 20% and slides up to 50% based on performance.
The reason I don't use physical stops is because I sell rising prices and buy falling ones and my timing just isn't good enough with this method to use stops. The darns things got hit right at the exact tops and bottoms of the market so I had to figure out another way. I have a lot of backups on my system. Double internet connection, multiple pc's on the same platform, off-site pc access with a phone call, battery back up for the electrical system, house phone, and cell phone. It's not impossible to take me down but highly unlikely. Essentially, I'd have to lose both internet connections, my electricity, my battery would have to fail, my house phone would have to cut out and my cell phone would have to lose it's signal while WWIII is breaking out. Actually, my biggest threat is my broker going down. If I don't have a physical stop in and I can't access them by internet or by phone then I'm basically up the creek but thankfully that has never happened. I do place a stop well away from the market so I won't get caught limit down. Hopefully that's my worst case scenario.
I have a friend that has about $4mm in a bond portfolio and is willing to transfer them to the LP and let me trade on the margin. He doesn't want me to sell the bonds. And He wants the income but understands there could be losses.. He currently has the bonds in a brokerage account. However, I have some other smaller capital commitments from others. Is this wise or even practical?? He actually approached me, and I was unsure of how to answer. Any thoughts??