MainCycleV
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Since you are just slightly interested, I donot have much interest to tell you about hedge funds. It is a tough job, and needs your whole effort and complete foucs.
jthetrader
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A hedge fund is basically a lightly regulated entity which takes money from sophisticated investors, usually high net worth individuals (i.e. rich people) and pension funds (although they are tightly regulated on how much money they can put into high risk investments), the fund then invests in a range of securities and attempts to produce superior returns to the market. It is effectively a way for investors to get a chance to acheive returns passively which normally they would have to seek out actively.
This can be done through a number of methods, usually a lot of leverage (aka gearing) is employed by the fund, a lot of dedicated research is performed, brainy Physics and Maths grads are employed to build computer models of markets etc all in order to acheive an edge.
At the end of the year the hedge fund manager takes a percentage of the fund's total assets (around 2% usually) and then a percentage of the gains for that year (20% usually, sometimes as high as 40% though). So if you have a £100mn fund which you turn into a £150mn fund the manager and his staff will be taking home around £12.4 million. This is where the hedge fund managers get a reputation for making squillions of pounds. However, take reports of hedge fund manager compensation with a pinch of salt, much of their reported income is capital gains they have made because they own part of their fund.
I presume you're asking because you want a job at one, well get to the back of the line because we all do.
And unless you're smart, lucky or super well connected (I'm guessing you aren't because if you were you'd be asking all the hedge fund managers you know about the hedge fund business rather than people on this forum) there isn't much chance. Good luck anyway.
jthetrader
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As for what it would take to set one up? Well, cash. You could set up something resembling a hedge fund up with a few thousand pounds, get yourself some trading software, give yourself a fancy title and start making investments.
The laws regulating it are byzantine (so you'll have to retain some expensive corporate lawyers), but provided you can get all of the right paperwork filled in etc you can start taking in money from certain classes of investors (in the U.S. they are required to have a net worth of at least $1 million or an annual income of at least $250,000; this is to stop small time investors getting bankrupted when the fund they invested in goes under completely and they lose their life savings with it).
Now the hard part, persuading people to invest with you. Generally you need to have two things from what I have heard, firstly you need to have built up a reputation as a good money manager, this is usually done by working for someone else and getting known in the world of high finance as a whiz kid, secondly most investors will feel comfortable if you have a lot of 'skin in the game', so it will look good if you put a lot of your own, personal funds into the hedge fund. They want to be sure that you have every incentive to make money year in year out, rather than taking a big risk in the first year, collecting a big bonus if you win and then not really caring what happens in the following years.
Beyond that, you'll need a few strategists, a good broker and some kind of edge on the market. And if you start acheiving exceptional returns month after month, year after year your reputation will precede you and you will be able to attract more and more money and so be able to make more and more money.
The laws regulating it are byzantine (so you'll have to retain some expensive corporate lawyers), but provided you can get all of the right paperwork filled in etc you can start taking in money from certain classes of investors (in the U.S. they are required to have a net worth of at least $1 million or an annual income of at least $250,000; this is to stop small time investors getting bankrupted when the fund they invested in goes under completely and they lose their life savings with it).
Now the hard part, persuading people to invest with you. Generally you need to have two things from what I have heard, firstly you need to have built up a reputation as a good money manager, this is usually done by working for someone else and getting known in the world of high finance as a whiz kid, secondly most investors will feel comfortable if you have a lot of 'skin in the game', so it will look good if you put a lot of your own, personal funds into the hedge fund. They want to be sure that you have every incentive to make money year in year out, rather than taking a big risk in the first year, collecting a big bonus if you win and then not really caring what happens in the following years.
Beyond that, you'll need a few strategists, a good broker and some kind of edge on the market. And if you start acheiving exceptional returns month after month, year after year your reputation will precede you and you will be able to attract more and more money and so be able to make more and more money.
They were "hedge" instruments until speculators got in control and become "evil" things...
Now go back to your books...
NVP
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rathcoole_exile
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LuKOs.ro
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You can start trading on your own account. Read as many books about trading as you can, from the FAQ Section on this forum, start playing on demo accounts, and when you feel confortable and have a consistent strategy and some idea about risk management go on an open a micro-account.
After 3 to 5 years of above average returns, start advertising your method and hope to attract investors.
Nobody will do the work for you, friend, so you'd better be getting your hands as dirty as possible.
jthetrader
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You know, all of the news surrounding hedge funds and particularly surrounding the generous compensation of the hedge fund managers got me wondering. Would it be possible to sell a course in 'Realising the dream. Actualising your potential . Becoming a hedge fund manager'?
After all there is no universally accepted definition of a hedge fund manager...all you would need is an ex-hedge fund manager, a bank account to accept the cheques, a few convention centres booked and a ****load of advertising targetted to people who had used search terms like 'hedge fund jobs' hedge fund manager pay' 'george soros net worth' etc
I reckon you could charge a few £1,000 for a 2 day course. And there would be no shortage of people to sign up, the greater the potential bounty the more attracted people are, instinctively. If these 'make a living trading' courses can sell profitably, 'become a hedge fund manager' courses should sell.
And you could flog books, trading software packages, website design services for all the budding new fund managers, up-front fee accountants to get their books in order. Hmmm....I think I may give up on being a trader and make a start in the business of servicing the retail trader market.
Yes it's much easier to be dishonest and use deceptive marketing to rip off decent people than it is to work hard and achieve success. That is why there are so many criminals in the world. If you are going to run these courses then I think you should keep a record of all attendees addresses so that you can get a friend to break into their house while they are at your course. I mean why not go the whole hog and rob them properly.
jthetrader
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Any more good ideas? In fact, wtf was I talking about with them paying by cheque, why not card that way we can take their details and plunder their account and produce passports in their names and sell them to illegal immigrants...BTW I'm joking, I am wary of the kind of people who tout profitable trading methods etc I'm not a criminal and I have no intention of making a living selling people lies. Would I be on here openly mocking the idea of a successful 'become a hedge fund manager' course if I were going to open one up? I just want to be clear so you don't think I'm scum.
I do however like to indulge the thought of taking the easy, dishonest route to making money. So I posited opening up a 'Become a hedge fund manager' course just to see whether others on here think it would take off, from your anger I suspect you think there would be suckers for it.
jthetrader
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Sorry pboyles but I have to disagree about your characterisation of the victims of these kind of scams as decent people, they tend to be lazy, greedy ****ers who want the easy way in, no? Why else does someone buy the "Make a million in 3 weeks" book or go on the, "Become a millionaire day trader in 6 months" course? They want an easy way in and they think everyone on this board who plugs away at trading day after day with a few hundred £ is a t wat...until they realise they were played.
Depth Trade
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You want to be a "fund manager" not a "hedge fund manager"
The reason all the hedge funds go broke is because they have no position, because they have no idea where the market is going, hence the hedge.
If you're hedged, you have a neutral position and all you did is pay twice the commisions for that position.
You want to be a "fund manager" and have a position in-line with market direction.
The reason all the hedge funds go broke is because they have no position, because they have no idea where the market is going, hence the hedge.
If you're hedged, you have a neutral position and all you did is pay twice the commisions for that position.
You want to be a "fund manager" and have a position in-line with market direction.
Very true, lazy, greedy, want it all for no effort. Still it doesn't justify someone robbing them blind (and I appreciate that's not your intention).
BTW I'm joking, I am wary of the kind of people who tout profitable trading methods etc I'm not a criminal and I have no intention of making a living selling people lies. Would I be on here openly mocking the idea of a successful 'become a hedge fund manager' course if I were going to open one up? I just want to be clear so you don't think I'm scum.
I do however like to indulge the thought of taking the easy, dishonest route to making money. So I posited opening up a 'Become a hedge fund manager' course just to see whether others on here think it would take off, from your anger I suspect you think there would be suckers for it.
I was going to tell you to scam their cards too, just forgot to mention it. Also don't forget to sign them up for your monthly millionaire alumni club (£2500 membership).
jthetrader
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No it doesn't. However, humour me a second here, suppose we abstract from my example, which btw involved no criminality AFAIK, to a situation where there is a professional trader and an amateur trader both participating in a market. The pro trader would/should have good control of his emotions, realistic targets in mind when trading and a full understanding of the market and its dynamics and he has a big bankroll to boot; the amateur trader is emotion guided, has a poor idea of how the market really functions and can't sustain a big loss due to his high levels of leverage (a product of his greed and him having suffered the effects of misinformation), in this scenario the pro trader is effectively predator and the amateur, due to being greedy and green all at once, is the prey. Is the pro trader justified in operating in the same sphere as the amateur trader?
Informational assymetry doesn't just apply to markets, that is the point I'm trying to make. It applies to life.
jthetrader
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Yep, the monthly millionaire club, I like this, leaving is easy; just a small severance fee equivalent to 50 months membership so we can cover the paperwork costs you know. Oh and if you're not a bona fide cash millionaire you have to leave the club so.....
natureboy
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Well, I thought the same at one point that there is a hedged position (I think though now that the hedge is against bear markets for the clients since a typical portfolio for people doesn't short sell for example).
Hedge Fund Definition
