Hedge Fund Opportunity

This is a discussion on Hedge Fund Opportunity within the General Trading Chat forums, part of the Reception category; Originally Posted by GammaJammer And I also still maintain the figures just don't stack up - setting up a business ...

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Old Apr 30, 2008, 2:42pm   #61
Joined Feb 2008
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Originally Posted by GammaJammer View Post
And I also still maintain the figures just don't stack up - setting up a business is HUGELY expensive in this industry. Infrastructure and staff costs alone will absolutely kill you if you're aiming for something halfway decent. There just aren't a lot of shortcuts.

Hope it works (assuming, as one poster pointed out, it's above board), but have a feeling it isn't gonna fly

GJ
GJ Makes a really good point. In this (HedgeFund) arena there are huge startup costs and regulatory angles to be considered. Also public marketing laws, performance laws, etc... Its crazy the headache and amount of money needed for startup.

Most successful HF managers have their client list before launch.

Thats the easiest way in. Become a Series 7 broker, Charge 1-2% AUM, grow client list or land one big one that trust you after you show great performances. Then you'll have your startup. And trust me, Your orginal backers will do all the Selling you'll ever need. Hell even the LTCM guy after the biggest blowup in HedgeFund history was still able to pull together ANOTHER FUND. Once you get in your in but it takes alot to get going!
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Old Apr 30, 2008, 3:28pm   #62
Joined Nov 2007
Another thing I think you should think much more about is your own renumeration package. Being the "plant" is only really profitable if you've got a few $mil to throw behind it; Once you're up and running, the Backers will believe they're making the money (after all, you could't do it without their capital) - Traders will believe they're making the money (who brings in the P/L asshole ?), and both will be certain that it's not you. If you can't bring in OPM to manage, it leaves you at the bottom of the food chain with the compliance and IT team etc...

... another point I'd like to make is the particular traders you are looking to hire. If we consider the population on T2W as representative of the trading community, a very very small proportion actually do this properly and profitably. Of these few, I should think the majority are prop traders in the STIR or FI futures markets; IMO the skills and strategies required to manage even $10m+ are wholly different to the skills and strategies that these traders have (not to say they aren't good, it's just different); at this kind of size, it's much more about fundamentals and directional views than playing the orderbook for the spread (I couldn't take a $1m position in crude futures or Eurodollar without f*cking it up a few times). Perhaps you could find swing traders in the FX markets, where sizeable positions can be built up inconspiciously and $100m isn't alot (ask the resident expert, this is just my speculation). Anyway the ins and outs don't really matter - you had better be sure that your traders are sizeable.
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Thanks! The following members like this post: GammaJammer , fifty2aces , Mathemagician , luckyd1976
Old Apr 30, 2008, 3:47pm   #63
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Originally Posted by GammaJammer View Post
I think the idea of employing only fat traders is very laudable (although you risk ending up exploying only ex Salomon Bros mortgage bond traders
GJ
lol

PC if your trading team consists of Ranieri esq. traders w/ Merriwether running the joint, stop now.
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Old May 1, 2008, 7:25pm   #64
Joined Feb 2004
don't think I'm knocking you, because I'm trying to be constructive here

Strategy

Strategically our aim is generate excessive returns on our Hedge Funds. We aim to achieve this by taking a fundamentally different approach to standard Hedge Fund dynamics. We are marketing a series of Hedge Fund products that will employ the most leading edge derivative techniques and constantly adapt to scientific advances.


and how do you go about PROVING this claim? Bluntly, for what it's worth, can't any hedge fund make similar claims?


Each fund will outperform conventional market benchmarks because each one will exhibit a derivative class that provides minimum correlation, and maximum risk aversion. Each of our Hedge Funds will utilise a leverage capability enabling outperformance in both a rising and falling market.


Again, anyone looking at this with any intelligence will see wishy washy BS. Any fund can make such claims, it's what salesmen love to do, big up their pitch. And providing no proof gives you no favours.


Our fundamental objective is to provide our Investors with a guaranteed consistent return that they cannot achieve elsewhere. We have the knowledge and the technology to achieve this objective. High powered leading edge mathematics will drive our investment returns to the efficient frontier. A point which other Hedge Fund Management companies have found difficult to achieve.


I love the word "guaranteed" here. And putting down your competition - and all with no proof in sight!!! There are many funds that employ "high powered leading edge mathematics", and they either break even or lose!!!


The Funds shall be active and versatile. They will be driven by our Derivative Traders whose knowledge and understanding of their product area is second to none. Our Quantitative Analysts will continually provide investment models that will remain cutting edge. These mathematical models will enable us to deliver unparalled fund performance.


Unless you're James Simons your claims are highly suspect. You have no track record, why would people care?

Warren Buffet does not use advanced mathematics at all.

Nor does Anthony Bolton (although he's retiring).

And the top people in any field are few and far between - unless you've managed to persuade them to abdicate their chairs. And even then, these people don't like the market/results based environment since it's not the pleasant academic environment that is conducive to thinking and making breakthroughs.
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Old May 1, 2008, 8:15pm   #65
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Each fund will outperform conventional market benchmarks because each one will exhibit a derivative class that provides minimum correlation, and maximum risk aversion. Each of our Hedge Funds will utilise a leverage capability enabling outperformance in both a rising and falling market.
lol, I guess they will launch like a Rocket and fall like a Rock then.

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Originally Posted by temptrader View Post

Our fundamental objective is to provide our Investors with a guaranteed consistent return that they cannot achieve elsewhere. We have the knowledge and the technology to achieve this objective. High powered leading edge mathematics will drive our investment returns to the efficient frontier. A point which other Hedge Fund Management companies have found difficult to achieve.
Guaranteed return? BS, Guaranteed Principal possibly... Didnt LTCM use Mathematics that other Hedge Funds found difficult to achieve? If I remembre correctly they were notorious for hiring the PhD types first and then trade from there. And what happened to them?
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Old May 2, 2008, 4:44pm   #66
Joined Apr 2006
I thought if you were setting up an offshore hedge fund in BVI, Panama, Belize or any other jurisdiction then you dont need to be regulated by the FSA?? Is this correct?
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Old May 2, 2008, 5:05pm   #67
Joined Nov 2007
I struggle with the legalities after this, but I think it depends on whether the Regulator in the country you're based in is recognised by the Reguator in the UK or wherever (i mean, you wouldn't expect to be able to get a liscence in some backwater country and then come to the UK and advertise an ISA). Of course, if you're not doing business in or through the UK then the FSA don't need to know anything - otherwise, it depends on what exactly you intend to do. If you want to advertise to UK domiciles, then you need to be FSA regulated (infact i think you will probably need to be FSA regulated if you are managing OPM - wherever it comes from - in the UK, even if all your business is done on US markets for example). I don't think you need to be FSA regulated just to operate in the UK with prop capital though.

Others will know more, I don't deal with this side of things.
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Old May 2, 2008, 6:04pm   #68
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Thanks MrGecko
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Old May 2, 2008, 6:10pm   #69
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Also depending on size and client base, your PB might want you to be FSA authorised anyway. Again, not certain about any of this though.
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