What's a cost efficient way to PROVE your track record to eventually start hedge fund

Discussion in 'Index Futures' started by canadian_dude, Sep 3, 2003.

  1. I want to PROVE my trading results in a cost efficient way, so that I can attract investment capital for a hedge fund a few years from now. Some background:

    I've had a lot of success as a trader over the last 18 months. I made over 200% profit on capital during the first 12 month period, trading the emini's. I do NOT daytrade, I trade only a couple times a day, sometimes I do not trade at all for several days, I just hold a position.

    Like many people, I have all my friends asking to invest money with me. So far I have told them all it is illegal for me to manage their money for them.

    But its not like I haven't thought about professional money management. Not the chump change my friends want to invest, no, I would want to manage much larger sums eventually if I wanted to do that at all.

    So like many people here, I have looked into what it takes to get into this field, the obvious one being to start your own hedge fund. But that looks like an EXTREMELY difficult task. It's like a "what comes first chicken or egg" problem.

    You can't attract investors without a proven track record, and you can't create a track record without investors. Of sure, I have my PERSONAL trading record, but from what I have read, these are largely ignored by the investment community. They are looking for several years worth of AUDITED trading results.

    My question is this: Is there any way to create an AUDITED trading record that will be taken seriously by potential hedge fund investors, without actually going out and starting that hedge fund?

    Because from what I read, you need at least $1 million to start a hedge fund, because you will incut $75,000 in costs your first year, and $25,000 a year after that. So you need some size to the fund to justify these costs.

    What about alternatives? Is it possible to create a REGISTERED COMMODITY POOL instead, and get that thing audited, therby developing a track record that would be taken seriously by potential investors when you take the next step and start a hedge fund a couple years later?

    My understanding of the Registered Commodity Pool requirements are that that it be limited to $5 million and 99 investors, but that the investors don't need to invest huge sums of money. This would allow me to tap into all the $10,000 amounts that most of the people I know want to invest. I also think that there are no auditing requirements for a Registered Pool, am I correct about this? Or do you need an annual audit? Like I said, I would probably want an audit anyway, so I can use the PROVEN results to attract hedge fund money a few years from now.

    Does anyone know what the costs are to run a Registered Commodity Pool versus a hedge fund start-up? I would think the Pool would be much cheaper to run?

    Thanks for some answers.
  2. T-REX


    go to www.nfa.com
    The National Futures Association has all the info you need about starting a pool.

    Also, check out www.cme.com
    they have a FREE booklet on starting a CTA & CPO and what it takes with interviews with some of the most successful of the bunch.

    Also, it is not illegal to manage your friends accounts. Its called "POA" or limited power of attorney. Most brokerages have these account forms available online when you open an account.
    You can also take part in the profits and charge a commission if you register as a CTA.

  3. Momento


    erh... This is a link to the
    National Fire Adjustment co.

  4. Momento