%% LOL True in some cases Trend M. I see Boaz Weinstein /Saba Capital Management settled the 15 month lawsuit with Canada's Public Pector PIB [actually the pension fund of the RCMP -Royal Canadian Mounted Police ]Forbes[ online] had it . Noted he took the other side of the JPM London whale trade.............................................................................................................They also noted the trend of hedge funds cutting fees[MARCH 2017 Forbes free online artcle]
Set Up Fees around 15k in Bermuda or Cayman including standard Offering Memorandum (you don´t have to invent the wheel again for quant funds). Monthly Fund Admin costs = depends on what asset classes the "quant fund" is going to trade a) equities b) bonds c) currencies d) Futures, Options e) ETF´s f) Commodities (and Futures) Audit costs (Deloitte, PWC, KPMG, E&Y) approx 10-15k once a year. Then the usual fund domicilation and government fees. Note: There are a lot of rookies out there WHO "think" their fund must have well-known service provider names in their Offering Memorandum. Don´t forget: you engage in this business to MAKE ACTUALLY MONEY and not to spend money - with other words make your legal, fund admin, auditor happy! These "players" will sell you fairy tales....
With all due respect: 6 figures legal & Compliance costs? LOL! ROFL! LMAO! Sure, if you want to pay your legal´s USD 500 five star restaurant visits and their Porsche´s...Ha, ha, ha....
investment banks offers "prime brokerage" services to hf. including compliance, brokerage, capital (some times), legal and sometimes even office room
It's about right. If you want a real, Manhattan attorney, you can expect to pay upwards of 1,000 / hr. And this is not a one-time cost to set up the legal structures and docs (a typical fund has three entities, an LP which is the fund, and LLC for the GP, and an LLC for the management company, each needs it' own taxpayer ID's and returns fled) but the ongoing legal as well, every month. Six figures is conservative and easy to hit, believe me. The biggest cost though, as someone pointed out here, is capital introduction, and the pipeline of going along maintaining your business as they sit and watch, most, for several years. What connections do you have? This is the first question to ask in starting your own fund. Who will invest and how will you get them?
Set it up outside of the US, and don't take US clients. Will reduce your cost hugely and also makes the paperwork and disclosure documents much easier.
No, set it up in NYC. There are several regulatory reasons for this, but also for marketing. You can always build out a master-feeder structure later if that becomes necessary. Do it by the book and top shelf. Don't cut corners on anything. Expect to pay $300,000 to stand it up, then t that add however much you intend to prime the GP investor with. Even if you do it like this, you will have a difficult time getting a respectable auditor. You will likely not be able to get on the decks of a decent prime broker either - these things take time. A real-time track record helps, but that is only a minor help compared to actual month-after-month of the fund trading real money -- usually yours and family and friends if you are lucky. Most serious investors will not invest on year one, and most require you be up and running for two years. You need an office, employees, a payroll wherein you're filing the monthly EFTPS, and you can expect to do that for two years before you can attract any real money. You need to go out and hustle it, talk to potential clients, get into various events, expect to pay 5,000-50,000 to present at any event. The Context event in Miami will cost you $10,000 / year alone just to be on the floor. You'll need someone (employee) to handle the trading for you. Of greater concern, of course, is defending the downside on the equity. That's the over-arching concern of the manager, far more than big enough returns. The road narrows, like everything else in life, and you need to be able to survive long enough to garner clients, and that means surviving market downturns, being defensive. If you want to create a fly-by-night-type operation, you won't get off the ground. People who are going to invest millions with you are not going to engage with anyone who is not absolutely, totally clean, totally top-shelf. Do you want to start a real hedge fund, or do you want to run a business out of the trunk of your car?
Many huge businesses started out "of the trunk of a car." Microsoft started in a garage. Facebook in a dormitory of students... If you are really good you can start very simple., and clients will stand in queue once your performance is skyrocketing. There is more money available from investors then opportunities to invest it in. You don't need big investments, you need performance to catch clients. Speaking from personal experience... Investment was close to zero. But none US, so no annoying NFA or CFTC.
It sounds as though you are speaking of futures, and I am speaking of essentially, everything else (equities, private equity / lending, etc.) I agree the US regulatory agencies in that arena are onerous, and I would not start anything in the US that included being under their jurisdiction. I you're looking for small investors, I'm certain you can do it for a much smaller cost, as suggested. Serious family offices, FoF's, sovereign wealth funds and other institutions will have "their people," to watch and interrogate you for a considerable period of time, and they are not chasing returns - that's for guys at the track. These types of investors are primarily interested that you are able to withstand various market regimes, have staying power both as a business and as a strategy, and mostly, what you will do in worst-case scenarios. That said, there's also a lot to be said about getting many smaller investors, and, if you have a streamlined-enough operation, you can definitely do very well that way. But there is a different market you are after in both instances, and you should determine at the outset which you want/can pursue, and they do come with different initial costs.