Starting my own small fund

Consultant in Consulting

Hello all.
Has anyone here started their own fund while in grad school as a passion project? Would love to hear experiences and unique challenges or surprises that popped up.

Me and a few friends have created our own model that both backtested and forward tested(since inception a few months ago) in markets has done well.

With the results, we would be able to get a couple
hundred thousand pooled between us and family to create a fund. We already know how to set it up structurally and legally. This would be a private fund with the restrictions that come with it, but lower compliance cost.

However, we are curious if it would be worth it. If the fund performs well based on a dated white-paper, even with a small AUM, would there be any way to sell the proprietary strategy? Like many quantitative strategies, we expect the market to eventually equalize out, and wind down the fund after a few years. So if that sort of exit is not possible, would hypothetically having closed a fund out with good returns be a positive resume item for exits? We are currently in grad school and a couple of us will be working in professions with restricted trading after graduation next year, so it will go blind to us(got the initial go ahead from future employers though they would need docs to give final clearance) and one of the partners finishing his PhD at our target school would take over management at that point in time.

While I haven't formally started a fund myself, I have helped a couple of traders start their own incubator funds, incubator fund is essential a fund formed to create a verifiable and auditable track record of trading with specific while creating a structure that would be ready to accept LP commitments and funds and when the time comes to raise outside capital providing continuity to the GP of the fund and creating some credibility with the prospective investors. Doing this would help you get to know the inner working of a fund like what service providers would be required like a prime broker, fund accountant, administrator, securities attorney, technology stack and how the regulatory requirements are to fulfilled for different type of funds and investors.

It is pretty straightforward to setup if you know how it works, and also assuming that you are going to be trading listed securities only and based in the US.

It should cost $20-30k USD if you use a service provider and even upwards of $70k if you use an attorney, even though it would make no material difference if you do choose an attorney for an incubator fund. 

You'd even be better served going with a service provider considering their handholding support, industry contacts and value for money. 

Let me know if you'd be interested in going in-depth.

Thanks & Feel free to ask more questions.