Setting up investment firm UK help

[NewTo]

Hi all,

So my plan is to set up an investment firm. Initially capital will be provided by a family member, and I would like the option to take on further investment as we go on, intially from other family members then other investors.

The structure will be that I will keep 1/4 of the profits above a certain percentage but that's not yet decided.

What is my best option? Registering as a hedge fund? Of course we will get legal and accountant advice before beginning but could anybody outline how to get started etc as the Internet isn't providing much advice?

Also are there any obvious pitfalls? Recommendations for assets under management etc?

If somebody could point me into a good source of information that would be great.

Thanks

Newto

 

[Trading Spaces]

https://www.interactivebrokers.com/ff/en/main.php

Open an IB friends and family account to avoid any costs and regulation. When you get past 15 sub accounts then you have to go legit and spend upto a £100,000 to be a hedge fund.

 

[EnlightenedJoe]

When the money is lost you can say goodbye to family. Is money worth that much ?

If you are as good as you think you are, you should withdraw money from the market and then use it to go big.

 

[NewTo]

Hi sorry I don't mean to come across as good etc, the idea would be to generate modest returns by investing in stock i have identified as undervalued. Obviously I am not an oracle or anything but I would hope in a good economic climate to generate returns between 4-20%. I don't actually know how feasible this is honestly but please be aware I am not expecting anything astronomical.

I would hope to have 150-400k pounds AUM initially, does this drastically change things?

 

[Trading Spaces]

When the money is lost you can say goodbye to family. Is money worth that much ?

If you are as good as you think you are, you should withdraw money from the market and then use it to go big.

He sounds like an investor and not a daytrader/gambler.

 

[flux]

Hi,

I would actually like to add my questions to this thread rather than starting a new one:

Given the above suggestion of the IB Friends & Family account, would anyone know what the FCA would have to say about this? Or is this normally too small for the FCA to worry about as long as none of the friends/family complain?

Other than that, what are the options to take on money from a few friends (let's say somewhere between £10k and 100k, totalling less than £500k) without falling foul of the regulatory regime? Would an LLP with the "investors" as members be an option? Please don't say speak to hedge fund consultants - then we'd be talking start up costs and annual running costs in the high 5 figures at least (please correct me if I got that totally wrong...).

Any ideas, experiences, suggestions would be very much welcome. I tried to find out a bit more about the much maligned UCIS, but still don't know much about that, I have to admit.

Thanks in advance for any information posted!

 

[Trading Spaces]

Just go down the IB friends and family route. If you get good/large than worry about the FCA later. You can be in business today with IB. It allows you to charge the sub accounts for your services as well as handling the allocations.

 

[flux]

IB F&F is certainly attractive, but does have a few disadvantages:

- Technically, I'd be managing other people's money (unless they are immediate family, it legally makes no difference if they are friends or complete strangers). Hence, this might be a grey area if I don't charge them, but almost certainly fulfils all criteria of a regulated activity if I do charge them money. I guess the FCA won't care about something they don't know about, ie if nobody complains, everyone is happy, but it's almost certainly not compliant (see 2.7.8 and 2.3 of the FCA's PERG).

- IB F&F doesn't allow you to pool funds, which means that the benefits of a portfolio margin account aren't available to people who invest less than $100k (and that'd be REALLY helpful given our trading strategy).

For these reasons, I was wondering if anyone has any suggestions on a structure that allows the pooling of funds preferably without requiring FCA approval and the costs/efforts that this involves. Would a LLP be a possibility whereby investors become members of the LLP and the LLP then invests its own funds?

Any thoughts, experiences, suggestions appreciated!

 

[tallytrading]

LLP foresees that the control of the company is outside the British territory ....

 

[flux]

Just go down the IB friends and family route. If you get good/large than worry about the FCA later. You can be in business today with IB. It allows you to charge the sub accounts for your services as well as handling the allocations.

Also: in the UK at least, IB doesn't let you charge sub accounts.

 

[OnlyScott]

Never invest friends or family money - most guys no matter what they tell you are not looking for any type of drawdown, especially when they are not familiar with trading.