Would you manage OPM without an asset management fee?

If you have a 40% drawdown I would think they would want their money back from you anyway lol. That is pretty big.

I would take a high % of profits and no management fee as I have no overhead

 

no overhead. perhaps your handle should be optioncouch.

 

For family/relatives only.

 

Actually I take that back, Comcast and X-box are fixed costs

My point was that I have no extensive staff or large office space to pay, what I have is more expensive..... wife, kid and cat!

 

I would trade OPM w/o an asset management fee, without question, for a cut of the profits.

So instead of typing in 500 and clicking transmit, now i type in 1000 and click transmit for the same order, and make a little more then I used to. Wow, so much pain, having to type in a bigger number for my trades.

Now, if you're managing on a scale where you have to significantly change your strategy for more money, then maybe not.

 

well, once you start managing OPM, you have to register and prepare reports etc.

 

I charge either 0/35 or 1/25. Managers that are more interested in management fees and not losing their jobs (most guys running billion dollar hedge funds) are happy not gambling for big returns and collecting the 2%. When I get to a billion AUM I will let you know what I do I hope I have that problem one day.

 

What's wrong with studying Calculus?

nitro

 

just starting out as a CTA, decided to charge 0/25 in stead of the usual 2/20 fee. feels better to only make a profit when your clients make money. would obviously be different if i head huge overhead to pay.

 

“0% Management Fee & 30% Incentive Fee” vs.
“2% Management Fee & 20% Incentive Fee”

Please compare the following two fee structures (A/B) and post what you think about the pros and cons for each options in both clients and advisors point of view.

Compare two Fee Structures:
A. Fee Structure A (0% Management Fee & 30% Incentive Fee) --- For this fee structure, client does not pay any monthly management fee. Client only pays 30% monthly incentive fee when the account has a positive New Trading Profit.
B. Fee Structure B (2% Management Fee & 20% Incentive Fee) --- For this fee structure, client pays 2% annual management fee first independent to the account has a positive New Trading Profit or not in such month (payable at approximately 0.1667% (2% divided by 12 months) per monthly every month) and client also have to pay 20% monthly incentive fee when the account has a positive New Trading Profit. This is a very popular fee structure.

Assumptions:
• It is assumed that a client open an account with initial account size US $100,000 at the beginning of month.
• It is further assumed that the account has a positive New Trading Profit (pre management and incentive fees) of $X dollars at the end of such month.
• See below for more assumptions.

For the month, the total fee to pay to Advisor based on Fee Structure A:
• The management fee will be 0.
• The incentive fee will be 0.3X (X times 0.3).
• The total fee will be 0.3X (0 plus 0.3X).
• This fee calculation is simper than the one for Fee Structure B.

For the month, the total fee to pay to Advisor based on Fee Structure B:
• The management fee will be [(100,000+x)*(0.02/12)].
• The incentive fee will be [((100,000+x)*(1 - (0.02/12)) - 100,000) *(0.2)].
• The total fees will be the sum of the management fee plus the incentive fee:
[(100,000+x)*(0.02/12)] +
[((100,000+x)*(1 - (0.02/12)) - 100,000) *(0.2)]
= 0.2014X + 140.
• This fee calculation is more complicate than the one for Fee Structure A.

The Approximate Break Even Point. In order for client to pay the same total fee to Advisor in either fee structures:
• The fee (0.3X) for Fee Structure A must be equal to the fee (0.2014X + 140) for Fee Structure B, so X is approximately equal to $1420 (140/(0.3 -0.2014)).
• The percentage return (pre management & incentive fees), New Trading Profit, is approximate 1.42% ($1420/$100,000) for the month.
• To simplify the calculations, we further assume each month has the same approximate 1.42% return (pre management & incentive fees). Please note that this assumption is unlikely to happen in real live. It is used just for illustration purpose to demonstrate break even point concept only. The annually compound return (pre management & incentive fees) will be approximate 18.44% in order for client to pay the same total fee in both fee structures.
• Please note that approximate 1.42% monthly return is pre management & incentive fees, but the return after management & incentive fees is approximate 0.994% (1.42% times (1 minus 0.3)). The annually compound return (after management & incentive fees) will be approximate 12.6% in order for client to pay the same total fee in both fee structures.
• It may be likely (but not always) that client may pay less in the total management & incentive fees using Fee Structure A if the annual return is below the approximate break even point which is approximate 18.44% (pre management & incentive fees) or approximate 12.6% (after management & incentive fees).
• It may be likely (but not always) that client may pay more in the total management & incentive fees using Fee Structure A if the annual return is over such approximate break even point.
• Please note that the approximate numbers cited in here are just for illustration purpose to demonstrate the approximate break even point concept only.