how to set-up a tiny fund

[tuscan]

what do you trade if you don't trade through broker ? dark pool ? vegetables stand on the corner ? you are a bit too mysterious
and you don't look like you are serious (to me)

why you can't trade their money under your account ? why do you need their funds ? don't they trust you ?
you just created something in your imagination and would like to see how this, or whether this can be accomodated in reality, thats ok

But in reality, in such weird case as you showed I would delay opening a company as long as possible would give tham access somehow to see the balance and thats it

raising funds is reasonable when someone has a perfect idea and can't do his job with the kind of money he has or when he wants to unresponsibly risk other peoples money for (only potentially) bigger profits or for a thrill of handling it
To run a fund or "own a trading firm" its impressing in itself, attracts money itself and because of this the idea is extremely attractive I had a chance to observe the psychology of this

 

[gayaku]

The only reason why I want to raise money from other people is because I can't put much myself more cash on my system as I don't have more cash left, otherwise I would keep it all for myself. I have a few strategies coming live soon which could allow me to trade much bigger size.

Keeping all the money on my account, even my friends' money, would be doable for small amounts, like 5K-10K, but I don't think it would work for 50K-100K. Nowadays, whenever you do a bank transfer over a few Ks, you get a phone call from your bank, which is fine.

 

[zaq1]

Perhaps you should give your fund a legal frame to begin with. Download an IN01 form from companieshouse.gov.uk and incorporate a limited company. If you do it yourself it will cost only about £30. Keep major share in the company yourself to always protect your control of it. Do the company's accounts yourself using GNUCash software. Sooner or later you will need to re-classify the company as an investment company, do your research or consult a solicitor. Also, prepare to establish an offshore investment vehicle asap, your fund will need to protect its financial gains. Once this is ready, move the company's activities into the offshore vehicle. By this time I am sure you will know yourself what to do next...

Good luck. I hope to see you getting there.

 

[scose-no-doubt]

Lol

 

[gayaku]

zaq1, that sounds good. This is very helpful, as I have no knowledge of accountancy, law, legal... My skills are more into trading and IT. I have the feeling this last sentence will generate yet another cynical comment on this forum

Why do I need an offshore investment vehicle ? Does it mean setting up two firms, a UK one and on offshore one ? Offshore always sounds "dodgy", but it seems the thing to do in the UK. I heard not a single UK hedge fund is registered in the UK, they're all offshore.

How can I pay my investors, my partners and myself with this set-up ? Is it dividends, salary...?

 

[zaq1]

There are many great people here, I guess they are mature adult personas. Then there are also some bitter ones, too. If you wish to drive a "Chelsea tractor" and live in Campden Hill Sq asap, try to ignore negative remarks and get ahead with your idea. That means planning and ACTING on your plans.

The UK limited company first, because it is easier to incorporate and you need to be running, otherwise it is still just an idea (ideas are dime a dozen, as we all know...). The offshore entity later, it will be more difficult as this is actually setting up a company in another country, with different laws and rules. Why incorporate abroad? Lower or no taxes, benign legislation, investor identity/capital protection.

As for payments, you are right - pay yourself by dividends, directors' remuneration, through petrol/other travel allowances...
But, when putting your own capital into the company, only a minimum amount needs to be assigned in company shares - any substantial amounts you put in should be invested into the company against the company's debentures so that if the company goes bust you have preferential right to any monies before other creditors and shareholders.

Preferable follow other forums as well, mainly UK accounting/company secretary/company law/enterpreneur/venture capital forums, there are some good around. And, go for your plan. ACT now.

 

[rabc1]

Given that you & i suspect your friends are all UK-based, you should be able to get spread-betting accounts set up for all your clients and get them to sign a 'power of attorney' thereby trading in a similar fashion to a small fund.

 

[Masquerade]

There are many great people here, I guess they are mature adult personas. Then there are also some bitter ones, too. If you wish to drive a "Chelsea tractor" and live in Campden Hill Sq asap, try to ignore negative remarks and get ahead with your idea. That means planning and ACTING on your plans.

You do realise he hasn't even taken his A levels yet, let alone been to university? Isn't willing to work on acquiring his own funds and trading it. Seems to be too interested with just talking about elaborate plans and asking people what he should study/where amongst elaborate trading stuff when there's much better things to do at his age. The amount he's spent talking about all these things he could have stacked shelves in sainsburys and made at least £5k. I really don't get why he's doing this under another account as if it suddenly gains some legitimacy because it's not affiliated. oh...he's multi-accounting. Nice and honest, those skills serve well in the scamming business (where these things inevitably end up)

I already told him to do power of attorney and spread bet it weeks ago and here we are.

 

[gayaku]

I've asked all these questions because I believe I will be very soon in the position to raise money, and I'd like to start planning the next steps, which should be to find a good solution to manage other people money, and of course find investors willing to commit.
For the moment I'm focused on the core of my business : trading strategies, Java code, and risk management.

I don't need to justify myself to the bitter people in this site who have nothing better to do than criticize or pollute a legitimate question (how to manage other people money when the amount is below 100K). Those who can't do teach

 

[Masquerade]

Legitimate question: why are you using 2 accounts? Perhaps I should ask the seniors if it's allowed.

 

[gayaku]

I don't use two accounts, just one, under my name.

I don't think it's safe/doable to have a friend transfer me let's say 50k on my account, and one year later, let's say I made 20% return, I would return him 60k - fees. I don't think two individuals are even allowed to do perform big bank transfers without being noticed, but of course it would be the easiest.

As you may have guessed, I'm trading on the sporting exchanges, which are tax free for individuals.

 

[Masquerade]

This is your first and only account on this site? It's just the other week I spoke to someone about exactly the same thing with the same concerns using the same numbers you are and the writing style's identical to that of another poster. I guess a simple check by a mod can't hurt.

 

[gayaku]

I thought you meant trading accounts, but I also only use one single trade2win account ! maybe that's why there was a misunderstanding.
I'm not here to make people lose their time, I believe many people ask themselves this same question, and give up given all the hassles...

 

[alphadude]

G; am just curious; what secret product are you going to trade? if brokers don't deal with this product that what is it?

phoybe was spot on; you will definitely end up in tears.

as the other user commented; the fact that you are asking this question indicates you don't know what you are getting yourself into. having a friend with extra cash handing from his pants; does not mean you have to grab it.

anyway; remember how Madoff got into trouble - according to his interview from jail. He initially started a fund managing his family, friends, neighbours, and their neighbours money. after few losses; he didn't tell them about it; and thought he can cover for it when he makes 50% the following month. He kept doing that every month; and said to himself... "Gee.. i fooled this guys into making money consistently. why don't I stop trading and give them the statements and some of the virtual profit.

to cut it short; successful fund managers follows this process to get where they are at now:
- learn how to trade
- trade their own money;
- build a track record; at least 1 or 2 years of profitable verifiable track records. they usually show their brokerage statements. I am not sure about you; as you plan to trade a secret product
- get money from family; and contribute at least 30% of his own money to the fund
- trade!

this process takes at least few years; and yet; many of these *successful* fund managers end up in tears.

read about Victor Niederhoffer before you start your secret sauce.

 

[gayaku]

what's the point to systematically criticize, dispraise, be negative all the times, why immediately imagine a trading business must be a scam, a madoff... does it make you feel better ?
Do you feel better if people don't even try, like you. Do you feel less alone in your mediocrity/poweless ? what make you think I have no experience, no track record ? what make you think i'm a thief ?
shoudn't we try all together in a forum to bring each other up, instead of down ?

thanks for all the ones which helped here, i believe i will soon have the need to raise money : either keep the money on my own account, or set up a legal structure.

 

[alphadude]

what's the point to systematically criticize, dispraise, be negative all the times, why immediately imagine a trading business must be a scam, a madoff... does it make you feel better ?
Do you feel better if people don't even try, like you. Do you feel less alone in your mediocrity/poweless ? what make you think I have no experience, no track record ? what make you think i'm a thief ?
shoudn't we try all together in a forum to bring each other up, instead of down ?

thanks for all the ones which helped here, i believe i will soon have the need to raise money : either keep the money on my own account, or set up a legal structure.

well; you ask us here for opinion; and I expressed mine.

I invite you to revisit this thread once in a while; or perhaps after a couple of years.

 

[Mornington Crescent]

when you talk to the accountants dont forget to ask about how to deal with losses




bacon in the treetops

 

[tommog]

Been there, tried it, it really isnt worth the hassle unless you're handling very large sums of money. A typical fund takes 2% management fee and 20% profit split. If you have anything less than a million under management and are consistently making double digit returns the profit incentive its just not there. Especially as once you start handling outside money you owe it to your clients to have decent technology supporting you which doesn't come cheaply. What you are left with is probably not much more than what you can make on your own anyway.

Then add to the equation something that i hadn't considered, which is the stress of actually handling other peoples money. It's awful, you feel every loss twice as hard as when youre trading for yourself. And only get a minor share of the upside. You constantly have them asking questions "you made 6% last month, but only up 1% this month, whats happened? Have you lost it? I think i might take some money out here" was a typical conversation i had, and heaven forbid you have a down month they are on your case 24/7. And I had "sophisticated" investors backing me to the tune of about $2million. I would never do it again.

The only exciting aspect of it is if yo uget a track record and get some serious outside money coming in, 10,20 million and you can start earning a living off of the fees which is the goal of most funds, just get as big as possible.

 

[Alliance01]

Got to be honest here, the original post seemed like a sensible enough question and there does seem to be a degree if unhealthy cynicism from a good few people! Grim reflection on the world today. That said there were also a few useful responses. I have a very successful sports trading set up where I run mainly my own money. Very occasionally I may run a bit for a friend for a slice of any profits. It is psychologically a very different ball game though. One issue to be aware of; if you naked you main living from thus it can be taxable, betting or not. It's not my main job (sadly!) but still a tidy sideline.

 

[NVP]

interesting comment - and yes a tidy little thread here where someone was going to fall into a real pile of dodo if they had proceded ....(well I think so anyway)

Good to know you have a sucessful private sports betting business and helping a few people along the way ......thats nice

dont make to much noise about it though ...people are talking to the taxman all the time now about secondary businesses and tax unpaid on profits .....so dont lose them any money

N