how to set-up a tiny fund

This is a discussion on how to set-up a tiny fund within the Trading Systems forums, part of the Methods category; Hello, I trade my own money with systematic strategies. I'd like now to also trade money from "customers", mainly friends/family/ex-colleagues.At ...

Reply
 
LinkBack Thread Tools Search this Thread
Old Mar 7, 2012, 6:36pm   #1
Joined Mar 2012
how to set-up a tiny fund

Hello,

I trade my own money with systematic strategies. I'd like now to also trade money from "customers", mainly friends/family/ex-colleagues.At the beginning, I plan to raise a small amount of money, less than 200K euros, probably even only 50K at the very beginning.

What is the best way to trade other's people money for such a small amount ? I can not use "managed accounts", and don't want to pay 10K of fees given the size of my account. I live in the UK. Does anybody has experience with this ?

What are the startup costs ? how much tax shall I and my customers pay on the profit ? What structure/company type is most suited to this ? Are there some tax-efficient and legal options ?

thanks in advance
gayaku is offline   Reply With Quote
Old Mar 7, 2012, 7:45pm   #2
 
Masquerade's Avatar
Joined Nov 2007
Re: how to set-up a tiny fund

Just scam them. Isn't that what everyone does around here?

I know who you are
Masquerade is offline   Reply With Quote
Old Mar 7, 2012, 7:49pm   #3
Joined Oct 2006
Re: how to set-up a tiny fund

Quote:
Originally Posted by Masquerade View Post
Just scam them. Isn't that what everyone does around here?

Normally yeah, but scam or not these things always end in tears.
pboyles is offline   Reply With Quote
Old Mar 7, 2012, 7:53pm   #4
Joined Mar 2012
Re: how to set-up a tiny fund

gayaku started this thread The goal is not to scam anybody, but to find the most efficient way (cost, ease of use, time to set-up, tax...) to start a tiny financial company to trade others people money.
It will be hard to raise money if I don't have an official company.

Quote:
Originally Posted by pboyles View Post
Normally yeah, but scam or not these things always end in tears.
gayaku is offline   Reply With Quote
Old Mar 7, 2012, 8:11pm   #5
Joined Oct 2006
Re: how to set-up a tiny fund

Quote:
Originally Posted by gayaku View Post
The goal is not to scam anybody, but to find the most efficient way (cost, ease of use, time to set-up, tax...) to start a tiny financial company to trade others people money.
It will be hard to raise money if I don't have an official company.
My point was that even if you don't scam them it will still all end in tears.
pboyles is offline   Reply With Quote
Thanks! The following members like this post: The Leopard
Old Mar 8, 2012, 10:29am   #6
Joined Mar 2012
Re: how to set-up a tiny fund

gayaku started this thread does somebody has some advice about setting up a firm to trade others people money ?
gayaku is offline   Reply With Quote
Old Mar 8, 2012, 7:55pm   #7
Joined Jul 2010
Re: how to set-up a tiny fund

Start with an interactive brokers friends and family account. You trade in one account and allocate a % to each account. No fees or registeration with regulators required. You can get up to 15 accounts under the umbrella account.
Trading Spaces is offline   Reply With Quote
Old Mar 8, 2012, 8:09pm   #8
 
Mornington Crescent's Avatar
Joined Jun 2004
Re: how to set-up a tiny fund

if you have to ask then dont do it

its not for beginners
__________________
You have to decide !
Mornington Crescent is offline   Reply With Quote
Thanks! The following members like this post: The Leopard
Old Mar 8, 2012, 8:36pm   #9
Joined Mar 2012
Re: how to set-up a tiny fund

gayaku started this thread let's say I'm an ex trader in a bank, where I didn't have to deal much with administration. For the moment, I'm not talking about starting a 20M hedge fund, but about a 100K financial firm.
I have no idea yet on how to set-up a small firm to trade other people's money from the UK.

Also, I can't use Interactive Brokers, as I'm not trading traditional financial products.



Quote:
Originally Posted by Mornington Crescent View Post
if you have to ask then dont do it

its not for beginners
gayaku is offline   Reply With Quote
Old Mar 8, 2012, 9:03pm   #10
 
Jack o'Clubs's Avatar
Joined Sep 2005
Re: how to set-up a tiny fund

If you were an ex-trader in a bank you'd know that start up funds need $50m to break even for a reason. I know you think everyone is being obstructive but PBoyles' advice is spot on - it will end in tears. If you really really want to go down this route think about setting up a company in which the investors are shareholders in proportion to their capital contribution. I looked at it once before coming to the same conclusion as the others on this thread....
Jack o'Clubs is offline   Reply With Quote
Old Mar 8, 2012, 9:33pm   #11
Joined Mar 2012
Re: how to set-up a tiny fund

gayaku started this thread Thanks for all the answers.

I'm not talking about stating a 2/20 hedge fund, with a rent to pay, salaries for xx employees, bonus, bloomberg, fixed costs...
I have started on my "free time" a very small, systematic trading system, on "uncommon" financial products, and I'd like to know if there's a simple/efficient way to trade other people's money legally and easily, without using a broker's managed account as I don't trade through a broker. How would I pay myself ? How my customers would pay tax on the profit if any ?


Quote:
Originally Posted by Jack o'Clubs View Post
If you were an ex-trader in a bank you'd know that start up funds need $50m to break even for a reason. I know you think everyone is being obstructive but PBoyles' advice is spot on - it will end in tears. If you really really want to go down this route think about setting up a company in which the investors are shareholders in proportion to their capital contribution. I looked at it once before coming to the same conclusion as the others on this thread....
gayaku is offline   Reply With Quote
Old Mar 8, 2012, 10:27pm   #12
 
Jack o'Clubs's Avatar
Joined Sep 2005
Re: how to set-up a tiny fund

My point was that fees from a $50m fund just about cover the legal, compliance, FSA and admin costs before you get to all the stuff that you mentioned. If you do this legally you will need FSA registration, demonstrate MIFID compliance etc etc. Of course you don't need to do that, but if you lose money and one of your friends / family decides to get nasty you could get in a lot of trouble. I have seen rock-solid family and friend relationships founder when money is involved. It's sad, but it happens. The alternative is to set up a trading company that does sports betting or whatever your 'alternative' investment is and pays out its earnings as dividends to the shareholders after paying company tax. You can pay yourself a salary and/or take dividends as a shareholder. But I'm not sure that even this gets you round the need for FSA registration, you'd need to call them and check.

See here:

http://www.fsa.gov.uk/doing/do

Last edited by Jack o'Clubs; Mar 8, 2012 at 10:34pm. Reason: Link added
Jack o'Clubs is offline   Reply With Quote
Thanks! The following members like this post: The Leopard
Old Mar 8, 2012, 11:15pm   #13
Joined Mar 2012
Re: how to set-up a tiny fund

gayaku started this thread Thanks a lot Jack, that's very helpful.
This business is not and will never be very big. If the costs to start and manage it are over a few Ks, I won't do it, and will just trade my own money.
It also has to be simple to pay myself, my partner, and my investors/friends.

The trading company which pays dividend to its shareholder seems very interesting. What kind of company is that exactly ? is it a LLP ? What if the number of shareholders change over time ? What if they are not all in the UK ? I have friends and ex colleagues in Europe, Asia, US...

I need to keep it simple, cheap, even if it means no US investor for example.

I'm not sure I really need FSA registration, I will check.
gayaku is offline   Reply With Quote
Old Mar 9, 2012, 2:15am   #14
 
Masquerade's Avatar
Joined Nov 2007
Re: how to set-up a tiny fund

Quote:
Originally Posted by gayaku View Post
The trading company which pays dividend to its shareholder seems very interesting. What kind of company is that exactly ? is it a LLP ? What if the number of shareholders change over time ? What if they are not all in the UK ? I have friends and ex colleagues in Europe, Asia, US...
Ex colleagues! Good one
Masquerade is offline   Reply With Quote
Old Mar 9, 2012, 7:24am   #15
 
Jack o'Clubs's Avatar
Joined Sep 2005
Re: how to set-up a tiny fund

Quote:
Originally Posted by gayaku View Post
The trading company which pays dividend to its shareholder seems very interesting. What kind of company is that exactly ? is it a LLP ? What if the number of shareholders change over time ? What if they are not all in the UK ? I have friends and ex colleagues in Europe, Asia, US...
I don't know because that was as far as I got before I realised I then needed professional advice, and then I discovered that was going to cost me £400/hr and I came to the same conclusion as everyone else on this board - unless you do it properly (ie well into 7 figures of assets), it ain't worth the hassle. Just run your own money, seriously.
Jack o'Clubs is offline   Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Similar Threads
Thread Thread Starter Forum Replies Last Post
I set up a fund, qualified myself ..now I need experience happyhippy Home Trader 8 Dec 18, 2011 12:23pm
HEDGE FUND; How do I set one up and join in the bonanza?! stevoeo General Trading Chat 28 Oct 10, 2010 9:51pm
Has anyone set up a hedge fund for their trading activities? meanreversion General Trading Chat 15 May 31, 2010 10:06pm
How to set up a hedge fund oildaytrader General Trading Chat 17 Apr 29, 2010 12:10pm
Anyone wanna set up there own fund? divinci Home Trader 0 Nov 14, 2007 1:51pm

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)