I think the best way is to do both, if you are allowed (only feasible for FX traders, as I was told).
You also add all the overhead of worrying about SEC or CFTC registration, and all the disclosure documents, audits, statement prep, legal fees, etc. Then there are the clients calling you up every time the dow moves more than 100pts asking you how the day went. With the scaling comes the overhead and the associated headaches. A personal decision... worth it for some, others are happy doing their own thing or just running some "friends & family" money.
Start from here: "A mentor for forming and marketing FX hedge funds " http://www.elitetrader.com/vb/showthread.php?s=&threadid=117890