Starting your own Hedge Fund in college
What do you all think about starting your own Hedge Fund company in college? I am talking about some very very small amount (~20k) to start with (with only two people working on it). Wouldn't this be at least a good experience? If all else fails, it will at least be something to list on a resume?
Please let me know what you all think about it. Thanks.
Do you have investors? Managing your personal or family's money does not make you a hedge fund manager plus start up costs alone would be well over 20k.
read Money Mavericks, so you know what entails to be a hf manager
two friends and tried to do it (in the UK)... the post-crisis capital requirements and the start up costs are extremely high. even more so if you are looking to set a proper hedge fund.
20k and you're day trading.
100k and you're still day trading.
Moral? You are talking low millions for HF.
This seems to be more of a CV driven thing than experience. Surely for experience, you could cold call a list of small hedge funds for internships without risking your capital. Losing 20k to list on your resume as a 'Hedge Fund' is a silly way to give away money.
Everyone does this shit and tries to make it sound like they really did something cool. People will laugh at you and grill you if you list it and try to make it sound even remotely serious. If you happen to get some actual cash (not from family) in low-mid 6 figures, and a successful track record of a year or two, then sure go ahead you would probably have something to put down that demonstrates an interest in investing. Otherwise you're just pretending, and it probably belongs as a one word item in your interests: "investing"
I run 3 of my own funds part time and highly recommend it.. E-trade capital partners (30k AUM, 75% long/short, 25% macro), JPM Chase gold savings fund III (50k AUM, long only fund), and flake's pocket capital management (50 bucks, 100% quant equity).
oh man, i thought this was serious for a second lol
Gotta love multi-strategy funds.
What's the lock-up on the pocket fund? I like to use a black-swan strategy whereby I capitalize on undervalued opportunities to find small bills in pants and coats I haven't worn in a while.
Hahah. When I was six I used to play the spread on my parents' change jar. I would replace the quarters with dimes that I found, collecting a 15c profit on every trade. Unfortunately opportunities became limited after the SEC (mom) crackdown.
Dayum son, you've got crazy savings for your third year in the workplace! Especially considering your first year was in Ops.
I always thought you were more hood rich like me. I guess Jersey really pays off.
I did this in college. I used scottrade as my prime broker.
Me too, they have an excellent corporate structure and they give you all the tools you need to be your own boss. Plus Roger O'Riney's $7-in, $7-out trades made pushing 100 shares of Sprint in and out 3 times a week (that's the limit before PDT status, and Lord knows the $11k AUM I had from my Bar Mitzvah money isn't enough equity to allow for that sort of thing) a profitable venture.
I think its a great idea...however only do it if ur serious about creating a business and developing an edge in markets dont do it because you want a line on your CV. It is a hard fukking job and an end in of itself if you can get good, it isnt a means to get an analyst job thats just stupid. If you think of it as a resume builder you will just suck at it. Question is where are you going to get the money and whether the hedge fund structure makes sense at such a low capital level...you have to research that yourself.
Also worth mentioning that I believe Citadel was started in college...so go for it but do it all out for keeps not half-assed.
I attempted to start a systematic macro CTA last November after developing a trading system but upon running through the numbers I discovered that the startup costs alone would aggregate to about $105-115K (accounting fees, insurance, legal services, regulatory fees, cap requirement, software), and you're then looking at about $4K per month in monthly fees (market data, monthly accounting & reg fees etc) excluding things like office space rent. Seemed like a gargantuan task back then hence I gave up, however I have realized that getting a mid-sized CTA to seed you with capital is very much within the realm of possibility and might help alleviate these issues but you would need at least $3mm in AUM just to break even. PM if you want details about the specifics.
$20K won't go very far to say the least.
Ignore the negative comments.
No - don't call it a "hedge fund" b/c it's not, and calling it a 'hedge fund' sounds like bull. Yes - manage money, as little as it may be, because you'll learn a lot and it'll help you tons being involved day-to-day with the market. It also shows passion / a real interest in the markets, whereas most people just BS. Yes - get it on your resume so that you can talk about it, but again, don't try and make it sound like more than it is (i.e. "Portfolio Manager - Bob's Capital Management"). Something like "Managed small investment account with peer; current holdings 10 longs, 5 shorts") - boom, interview gold.
This!
Thank you! What would you guys say if I was able to get 25+% return?
Uh, congratulations?
Depends on the time period and how you did it. If all you did was buy Apple six months ago, you'd be up 50% and no one would be particularly impressed. The NASDAQ is up 18% YTD so if you're just picking a concentrated portfolio of growth stocks 25% isn't that great. If you did it over a longer time period with decent diversification, low volatility and ideally some hedging (either via options or short sales etc) then that would be worth writing home about.
Great post. I'd be interested in hearing some thoughts about when to go from "small managed amount account" to "small investment partnership etc with XAUM" on the resume. I'm in a somewhat similar situation as OP as I will probably go back to school for a masters (after 1 year as an analyst in a commodity trading house - I am based in Europe so our cursus is a little different), and I will manage some money with a friend with basically FF money, with Friends luckily including some really HNW individuals (doesn't hurt to be based in the country with the heaviest concentration of billionaires on earth). We will basically start with a few 100k under management, and will get to a few millions if we perform well in the first 6month-year. Anything after that is pure speculation as we could only grow through HNW and Family offices, but we're lucky enough to be connected with the right people and we'll try to maximize this opportunity to learn a lot and hopefully make some money (and eventually make a career out of it if it really works out but I obviously know of what the odds of that happening are). If we don't become the next citadel while I'm doing my master (lol), my goal would be to get in Equity Research in a BB, and I'm really wondering how to put this "HF stint" on my resume, as I don't want to sound douchey (Portfolio Manager at Bob's capital) but on the other under just listing investing as an interest wouldn't really do justice to all the time and efforts put into it.
I would go with something like "Co-managed portfolio of $XXX" and include something that gives details of strategy / returns. If this is as you describe it, you'd probably want this at the top of your resume as opposed to others who would list managing a PA as Interest/Other.
The way to not come off douchey is to understand that launching a hedge fund (management company) requires significant time and money in terms of formation (legal), accounting, back office, prime brokerage, and technology. So you don't want to tell the guy who left SAC, drowned in paper work and spent days on the phone with lawyers drafting documents, then launched a $100m AUM fund that the both of you are running a "hedge fund".
And while there are plenty of long-only hedge funds, "hedge fund" really implies managing net exposure and risk.
It sounds like you've got a great opportunity. If do launch a fund, in whatever form, you'll probably have to deal with at least some of these start-up expenses/issues. You might have to form a partnership and hence titling it on your resume will be simple.
Think about it this way - while your FF know and trust you, $100k among a group of people isn't peanuts. You can't just throw their checks into an E*Trade account. You and they will have to report gains/losses to the IRS. If you ever ran into financial difficulty, without documentation your creditors could take $ from investors' accounts if it wasn't documented correctly or it looked like you were using the account for personal gain. Any partnership you form will require you to have rules and regs pertaining to how you handle investor funds. You probably can't just keep a spreadsheet with account balances as this will need to be audited.
I'll stop now as I am rambling - our funds are going through an SEC audit (this is a standard thing that happens a few years after formation) and it's unbelievable the level of detail and documentation they require, and how big of a distraction from managing money it can be.
Is using a prop trading firm a good idea to create evidence of return for future investors? I want to start a hedge fund in the future and want to have data of me making returns while I’m in college. Is this the way to do it or are there better ways?
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