How to set up a hedge fund

[oildaytrader]

http://www.moneyscience.com/Hedge_Fund_Tutorials/How_to_set_up_a_Hedge_Fund.html

Most of us will be told hedge funds can be set up by anybody with a few bucks.I don't believe that to be true.

My view is most hedge funds are set up by city insiders with connections to other people's money i.e pension funds.The vast majority of funds were sponsored by investment banks, setting up existing employees to run the hedge fund.Without these sponsors and seed capital , hedge funds would be difficult to set up .The internet is full of stories about ex-Goldman employees setting up hedge funds.

What is your opinion on setting up a hedge fund and the chances of ordinary people succeeding in setting up a hedge fund?

 

[BSD]

No doubt you're right that a lot of hedge fund are set up by bankers, simply because they have easy access to funds.

But I don't think that it's by any means a prerequisite.

There are lots of professional asset allocators out there that match funds with investors for a fee or even ongoing profit sharing lol.

Take guys like Warren Buffett who started out with a hedge fund that he seeded with money from friends, family and even neighbours.

Or top dogs like Paul Tudor Jones or Bruce Kovner (who drove a taxi for sometime lol) etc, all of whom didn't come from banks but are absolute benchmarks and superstars ruling the scene.

Thing is, does one want the hassle of having to deal with clients when you can just compound your own money instead ?

Marty Schwartz in his excellent Pit Bull describes how he set up his fund, and the absolute nightmares involved in dealing with clients. In the end he decided he valued his freedom more.

Like everything setting up a hedge fund has it's pros and cons.

 

[alexander]

...and the absolute nightmares involved in dealing with clients

or worse with the attorneys of the clients or even much worse, with the bodyguards of the clients.

 

[oildaytrader]

or worse with the attorneys of the clients or even much worse, with the bodyguards of the clients.

Or the two letter word GS team of Phds and rocket scientists hustling to learn your secrets.

Or hundreds of private investors from t2w ringing in middle of night ,threatening FSA during a losing streak.

 

[N Rothschild]

just start a cayman fund..prolly cvost u 30g in lawyer fee's

 

[gooseman]

yet again-aside from a poorly veiled snipe at goldman-what is the point in this thread?

did they turn you down for a job or something?

 

[oildaytrader]

yet again-aside from a poorly veiled snipe at goldman-what is the point in this thread?

did they turn you down for a job or something?

If you read the first post ,ordinary people have an illusion they can set up hedge funds,it is difficult to set up hedges unless there is major insider support from financial institutions.The dotcom bubble or the hedge fund bubble would not have been possible without the investment banks.

Goldman ,and Abby chauna stock ramper alias dotcom cheer leader and muppet master ,were part of of the dotcom bubble .When you look at pep accounts ,the two letter word GS issued those losers in the pep account.

Most of you city insiders will be laughing at your bonuses for systematic skulduggery,most pension and dot com losers are crying.

Hope you understand

O D T

 

[oildaytrader]

The financial crisis started with hedge funds at Bear Stearns.What effect will that have on setting up hedge funds ?

http://www.larouchepub.com/other/2007/3427mbs_cdo_crash.html

 

[Largesse]

can you just stop?

 

[Sunshine On Leith]

Your bitter obsessions are boring. Give it a rest son.

 

[Rainmaker]

Setting up a hedge fund is relatively easy. The process is pretty standard. The structures are now "off the shelf", e.g. UK LLP is the regulated entity, offshore management company and offshore fund. Usually Cayman or BVI. A few other bells and whistles around tax planning, etc. The difficulty starts with getting regulatory approval in the UK. The real clincher is whether you can raise sufficient capital without a track record and that is where having contacts and previous form as a trader/investor helps.

Obviously, no-one is going to trust you when you don't have a successful track record. There are some angel investors who do put money into newish funds, but that comes at a price.

Hope that helps.

 

[dealer911]

Why should "ordinary" people be setting up hedgefunds ?.. if you can attract enough investment with a decent track record there are no barriers to setting up a hedgefund anyway.. but I dont think it should be made easier.. should be harder if anything.. it was lack of regulation that caused half of the issues we have had.. more reguation to level the playing field would be a good thing.

 

[rawrschach]

investor find regulation had absolutely nothing to do with the recession, more regulation for the sake of regulation is retarded, you need the right regulation.

 

[wfo]

Agreed rawrschach. Also, as someone else mentioned earlier in the thread, there's a lot to be said for running your own dosh (less hastle, more autonomy, capture more of the upside etc etc)... worth noting that quite a few funds do it also (ie/ return investors money after a while and run partners money to capture 100% of the upside). One major reason they have investors are for the 2% fee's (nice way to cover the costs etc).

 

[spreader_legger]

I thought Marty Schwartz couldn't get the returns from his fund to justify the fees he was charging? At least that's what I got from reading his book.

No doubt you're right that a lot of hedge fund are set up by bankers, simply because they have easy access to funds.

But I don't think that it's by any means a prerequisite.

There are lots of professional asset allocators out there that match funds with investors for a fee or even ongoing profit sharing lol.

Take guys like Warren Buffett who started out with a hedge fund that he seeded with money from friends, family and even neighbours.

Or top dogs like Paul Tudor Jones or Bruce Kovner (who drove a taxi for sometime lol) etc, all of whom didn't come from banks but are absolute benchmarks and superstars ruling the scene.

Thing is, does one want the hassle of having to deal with clients when you can just compound your own money instead ?

Marty Schwartz in his excellent Pit Bull describes how he set up his fund, and the absolute nightmares involved in dealing with clients. In the end he decided he valued his freedom more.

Like everything setting up a hedge fund has it's pros and cons.

 

[SanMiguel]

How do hedge funds calculate the performance payout?
Is it based on when the funds were sent in to the fund?
So, you send on some money, they take an immediate 1% then any fund percentage returns are calculated from that date?

 

[scose-no-doubt]

Have a mooch around the forums and see if you can find a guy called wasp. He should be able to tell you all you need to know.

 

[oildaytrader]

Have a mooch around the forums and see if you can find a guy called wasp. He should be able to tell you all you need to know.

about porn or hedge funds?