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Starting a small, personal Hedge fund

Terriers12's picture
Rank: Monkey | 54

Just curious, how hard is it to start a one person, personal hedge fund? About how much would it cost? This has been done recently by a Wharton Grad who interned at DE Shaw. So it can be done. I recall him saying he is the President, Manager, and only investor. Something along the lines of that.

Comments (219)

May 5, 2012

the costs are fairly high, so unless you have some genius algo to make you mil/bil lions, it seems like a stretch. I worked for a small hedge fund from a dorm this year, and made fairly good $ from it, but it went bust 1 month after me leaving.

May 5, 2012

We were using algos that behaved perfectly when back-tested, and worked well in gen for a while; but later, it fucked up. Now the kid is in debt up to his throat (it was a sole proprietorship) after all the loans he took to leverage his postn

May 5, 2012

A one-man fund with one investor is called your personal account.

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May 5, 2012
GoodBread:

A one-man fund with one investor is called your personal account.

srsly

May 5, 2012

That isn't a hedge fund, it's your own money you're investing into whatever you want.

The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.

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May 5, 2012

The retard is strong with this one.

May 5, 2012

haha, just read the full post sober ... ya, thats not an HF lol

May 5, 2012

free to start, easy to run. the following link should walk you through it.

www.etrade.com

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May 5, 2012

Is it just me or has there been an unreal influx of retards lately?

The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.

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May 5, 2012
SonnyZH:

Is it just me or has there been an unreal influx of retards lately?

That's my line.

May 5, 2012
SonnyZH:

Is it just me or has there been an unreal influx of retards lately?

May 5, 2012

Make sure your investors understand the risks associated with investing in your hedge fund first, for legal purposes. There's a good chance they aren't sophisticated enough to qualify for investment in a hedge fund.

May 5, 2012

Relax with the comments guys. I didn't mean he had only 1 investor, I meant he was the only guy running the thing.

This is the article. http://articles.businessinsider.com/2011-02-24/wal....
"Right now it's just me," he told Bloomberg. "I am the CEO, I am the secretary, and I am the chief marketing officer."

Read more: http://articles.businessinsider.com/2011-02-24/wal...

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May 5, 2012

.

May 5, 2012

I'm guessing fund formation was much easier back in the day. How did Ray Dalio start Bridgewater in his apartment and Ken Griffin start Citadel. Did they actually have tens of millions of dollars in seed capital at only 22 years old?

May 5, 2012

Dalio started Bridgewater as a consulting company, and the hedge fund bit came much later; Griffin six figures in seed money when he was an undergrad.

There's a long tradition of starting unofficial hedge funds when you're young. I don't know the statute of limitations on this, so no details, but: I was definitely managing some accounts for family friends back in the day, and just getting paid a piece of the assets under management. I think that's similar to the arrangement Cramer had before his fund: he just ran an account for Marty Peretz, and they split the profits--no contracts, no registration, etc.

Illegal, yes, but that's not the situation they had in mind when they made it illegal.

May 5, 2012

To answer your original question, it is needlessly difficult and virtually pointless. Just focus on trading your own money and possibly some of your family's if you have the rocks. You're probably more likely to turn into Tim Sykes by starting a fund in college than Ken Griffin.

May 5, 2012
GoodBread:

To answer your original question, it is needlessly difficult and virtually pointless. Just focus on trading your own money and possibly some of your family's if you have the rocks. You're probably more likely to turn into Tim Sykes by starting a fund in college than Ken Griffin.

Tim Sykes = my all time favorite WS personality
http://gawker.com/302379/hedge-funder-tim-sykes-bo...

May 5, 2012
BlackHat:

Tim Sykes = my all time favorite WS personality
http://gawker.com/302379/hedge-funder-tim-sykes-bo...

That story is my favorite part of his whole saga. Rejected by Trader Monthly, pure gold.

May 6, 2012

The startup costs to launching a fund aren't really that prohibitive -- the hard part is landing an anchor investor who will actually be willing to be your guinea pig. The cost of starting a fund is around $20k at the low end for all legal expenses. Then you have to think about admin and audit, but if you have a decent sized initial AUM (1-2mil), you should be able to pay your expenses out of your fees.

May 7, 2012

This has been done recently by a Wharton Grad who interned at DE Shaw.

You left out that he's a senator's son
http://www.bloomberg.com/news/2011-02-24/hedge-fun...

May 7, 2012
MMmonkey:

This has been done recently by a Wharton Grad who interned at DE Shaw.

You left out that he's a senator's son
http://www.bloomberg.com/news/2011-02-24/hedge-fun...

Yeah I think that's a key part of the story.

Me and my partner are basically trying to do a similar thing (although we're quant guys, not value), except without having worked in finance before and without having people who want to bribe our fathers with millions of dollars. It's, uh, a bit harder.

May 7, 2012

I did this in college too, mine was completely under the table and not as large of an AUM. This kid pisses me off because I'd venture to guess he had/has no clue what he's doing but has a daddy who can help him out with investors. Don't take his story as a success story if you're trying to do the same thing.

May 7, 2012
BlackHat:

I did this in college too, mine was completely under the table and not as large of an AUM. This kid pisses me off because I'd venture to guess he had/has no clue what he's doing but has a daddy who can help him out with investors. Don't take his story as a success story if you're trying to do the same thing.

Well but it still goes to show you, you can make it happen if you can convince people. But I agree, inheriting wealth is instrumental in these 30 under 30 kind of success stories.

May 7, 2012

lol.

May 7, 2012

www.google.com

www.wikipedia.org

------

"its the running joke now, we now have fair trade with china so they send us poisoned sea food and we send them fraudulent securities."

------

"its the running joke now, we now have fair trade with china so they send us poisoned sea food and we send them fraudulent securities."

May 7, 2012

That has to be one of the funniest quotes I've ever seen.

May 7, 2012

A hedge fund grows shrubbery, horticulture is
where the new money is at since the subprime crisis.

The reason it is so profitable is because the "fund" grows exponentially as the hedge bushes reproduce.

May 7, 2012

Stern's right.

Eventually, once the fund of hedges grows to a certain size, it can then be harvested and the biomass can then be converted into ethanol.

The real trick however lies with the hedge fund manager. A good one knows exactly how much sunlight and fertilizer each type of hedge needs and thus will yield the best result.

Good Luck!

May 7, 2012
Lucaskhan:

Stern's right.

Eventually, once the fund of hedges grows to a certain size, it can then be harvested and the biomass can then be converted into ethanol.

The real trick however lies with the hedge fund manager. A good one knows exactly how much sunlight and fertilizer each type of hedge needs and thus will yield the best result.

Good Luck!

I have a 3.5 GPA and go to a non-target. What are my chances at harvesting hedges?

May 7, 2012

Man, nice job guys...nice job. Dont keep the man in the dark about how to best leverage all that high grade shrub and bush and fertiliser to augment returns now, and how to program the pruners to re-trim the hedge heights for optimal diversity in the hedge portfolio. Do continue to sprout the abundant wisdom. Treat the above posters with respect ecoe and they might let you in on a few tricks of the HF trade.

"God takes care of old folks and fools, while the Devil takes care of makin all the rules", P.E. 1998

May 7, 2012

I'm surprised no one has brought up this key fact about various hedges in use. Everyone forgets about the fact that not all seeds are ripe for the hedge fund world. Are we talking about using a standard american shrubery, or a eurpean hedge? How about a nice japanese-style bonsai bloomer? Also, there are comodity hedges that make great use of proper sunlight and fertilizer which will generate non-corrolated gains to the rest of your hedges because these aren't tied into the ethanol/replant cycle.

I'm personally enamored by a nice hedge or shrub that's not too expensive but appreicates well, and fits well into my nihilistic view of the current markets.

May 7, 2012

how lazy is the OP? I mean SERIOUSLY. Look for a NYMAG article called "Above the Hedge", it explains it. If you want to start a hedge fund, you can't be lazy and dumb, both of which you are. So you can't start one.

May 7, 2012

You also need $ + credibility. Don't see either...

May 7, 2012

what a hedge fund is

May 7, 2012

Haha you could always pull a Tim Sykes; invest during some bubble, make a cool million and then flaunt around how you made so much in order to get people to think you are some big shot trader. Convince these people to give you a lot of money in order to trade it into billions. Be an asshole. Lose about 35% of the money given to you, liquidate your remaining assets, and start a publishing company.

Then, start a website where you try and make a million out of your bar-mitzvah money again in order to regain some lost shred of credibility.

Glad I could help.

May 7, 2012

Make a lot of money. You start one by making a lot of money. So, sounds like you won't be starting one anytime soon.

If you do have a lot of money, though, let me know - I'll be happy to take some of yours and make more with it.

May 7, 2012

^burn!!!

I somehow got onto the tim sykes e-mailing list... and I can't unsubscribe!!!

May 7, 2012
Banking on Investments:

^burn!!!

I somehow got onto the tim sykes e-mailing list... and I can't unsubscribe!!!

Sue him for soliciting spam......

May 7, 2012

You know how you were told that money grows on trees, well basically everyone that told you that was wrong. Hedge funds basically raise money trees. I recommend a double major in agriculture and finance.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

May 7, 2012
trade4size:

You know how you were told that money grows on trees, well basically everyone that told you that was wrong. Hedge funds basically raise money trees. I recommend a double major in agriculture and finance.

Right! Go to Cornell!

May 7, 2012

I appreciate everyone's concern about ecological issues (we are in the green era, after all) but I'm shocked no one mentioned the importance of animal rights activism- the hedge hogs of the world need the brightest & most driven minds fighting for their cause too! Basically a hedge fund is an activist animal rights group that raises money for the preservation of hedge hogs. Highly profitable- you wouldn't know it, but there are over 1000 separate species of hedge hogs--for instance short haired, long haired, long & sort haired etc. Consider taking zoology or biological classification courses before you graduate as well.

May 7, 2012
AlphaGirl:

I appreciate everyone's concern about ecological issues (we are in the green era, after all) but I'm shocked no one mentioned the importance of animal rights activism- the hedge hogs of the world need the brightest & most driven minds fighting for their cause too! Basically a hedge fund is an activist animal rights group that raises money for the preservation of hedge hogs. Highly profitable- you wouldn't know it, but there are over 1000 separate species of hedge hogs--for instance short haired, long haired, long & sort haired etc. Consider taking zoology or biological classification courses before you graduate as well.

I seriously looked into getting a hedgehog for a while, but decided that my work schedule just wasn't condusive to the well being of any living animal.

May 7, 2012

its a shame that you all fell that way, but hey i guess thats life. Thanks for everything

May 7, 2012

don't be a baby. If you lay yourself out like that expect to get nailed.

If you want to find out about this sort of thing, start with google, wiki is good as well, or, go to a bookstore. Better yet, ask friends or parents of friends, or friends of parents of friends. Start smaller though and try to get a handle on what the stock market is, what finance is, how an investment bank works, how this is different from a retail bank, what products they offer, how companies can make money with debt products or equity products or advisory products etc. Get the basics right. I'm not trying to bollock you, but for people who have some experience, we're on here trying to add a small amount of value add to guide less experienced people through the early parts of their careers. When we see something like this...

May 7, 2012

HAHAHA some funny shit

May 7, 2012

i really wanted a hedge hog, no joke.

once i had a friend who accidentally stepped on a chipmunk and crushed it.

also, i know two football plays with chinchillas. they're cute - but kinda random...

May 7, 2012

this is one of the funniest forums on WSO by far. but seriously, what do the senior monkeys think of tim sykes - savvy investor or overrated prick?

May 7, 2012

Tim Sykes asked me to be his "friend" on facebook. I don't know the guy, yet I can't even hide from him. Tim Sykes = Big Brother?! Maybe that's what washed-up "millionaires" do with their free time...

May 7, 2012

The things I leave in the toilet every morning are mmore qualified than Sykes

http://modernyuppie.blogspot.com/ The musings and antics of a Meathead college wrestler turned asset backed securities trader.

May 7, 2012

yea you should try looking up at least basics before you post a question on the forum.

But basically a hedge fund is a group of people that manage money of very high net worth individuals. Hedging means to mitigate risk by implementing various investment strategies to offset each others risk, such as swaps, derivatives, and taking advantage of arbitrage. While some hedge funds do do this, this definition doesnt really apply to hedge funds.

In reality hedge funds probably take on more risk in order to have higher returns for their clients. What makes a hedge fund fundamentally different than other money managing entities is that they are highly unregulated (although this is beginning to change) and the lack of regulations allows for them to bend the rules and implement nontraditional investment strategies to increase returns.

If I am wrong somewhere feel free to correct me.
You should look this stuff up to get a better handle on it and to get more detail too.

May 7, 2012

Who cares if it a sub-$1B fund in this market - I'd take it if I were you.

Unless of course you have tons of other offers to consider.

May 7, 2012
j-rad:

Who cares if it a sub-$1B fund in this market - I'd take it if I were you.

Unless of course you have tons of other offers to consider.

But I've heard that you might not learn as much if you start at a small shop since they won't have much of a training program. It also is a bit of a gamble, because if the fund blows up or the partners decide they don't want to mess with it anymore, it could be difficult to move somewhere else since the name wouldn't be well known. Again, this is just what I've heard, I don't know how accurate it is and am looking for other opinions.

May 7, 2012

I've heard it's always better to get a brand name on your resume, since it allows you to move anywhere and people instantly understand what kinds of training and experiences you've had ... but in this market, you take a job when you're given a job.

May 7, 2012
546mpster:

I've heard it's always better to get a brand name on your resume, since it allows you to move anywhere and people instantly understand what kinds of training and experiences you've had ... but in this market, you take a job when you're given a job.

A brand name on your resume only gets you in the door. If working at this hedge fund would provide you with excellent experience, why wouldn't you take it.

May 7, 2012

such as what kind of position is it?

May 7, 2012

It's your standard equity junior analyst/associate gig.

May 7, 2012

they're up YTD and it's front office - take it. (also fwd my resume to them plz ... lol.) unless you have a lot of other options which i doubt in this environment.

May 7, 2012

Obviously I would take it if it ends up being my only offer, but I just wanted to see what others thought. This is exactly the type of job I want to do, but I wasn't sure if starting my career at a shop that isn't massive or a household name would hurt me in the future. But it isn't like I'm working for a guy out of his basement, as this is a legit shop that has been around for a decade and is up on the year. Thanks for the input guys!

May 7, 2012

Finalternatives
HFMWeek
Absolute Return-Alpha
Opalesque

These sites post news about HF launches daily. They usually list the founder(s). From there, you can find the rest of the contacts via linkedin.

If you have a specific fund or a location, PM me and I can look into my database and see if i can help.

May 7, 2012

lodge hill capital

May 7, 2012

This site has a directory for recently launched hedge funds. Good luck!
http://www.hedgetracker.com/top_2011_hedge_fund_la...

May 7, 2012

If I knew I would not have told you

"It is our fate to be tormented with large and small dilemmas as we daily wind our way through the risky, fractious world that gave us birth" Edward O. Wilson.

May 7, 2012
crowe:

If I knew I would not have told you

But you didn't know, so you did tell him?

May 7, 2012
Jacol123:

Does anyone know of any start up hedge funds that are hiring?

Lumina Investments

May 7, 2012

trade your own account?

alpha currency trader wanna-be

May 7, 2012

PM me if you're still interested.

May 7, 2012

I know of millions. E-trade.com, they are all wanna be HFs.

Follow the shit your fellow monkeys say @shitWSOsays

Life is hard, it's even harder when you're stupid - John Wayne

May 7, 2012

if you can raise money I'll hire you.

May 7, 2012

If the glove don't fit, you must acquit!

May 7, 2012

That ought to kill a lot of dreams.

Competition is a sin.

-John D. Rockefeller

May 7, 2012
Hooked on LEAPS:

That ought to kill a lot of dreams.

Thank god for that. While I was in ugrad there were always those stupid, hopeless kids of rich parents majoring in economics (not an Ivy - we had a Bschool). When they said they were going to start a hedge fund you cringed, but you couldn't tell them not to or their enormous egos would explode.

Hopefully this interview will help some of those poor, lost, spoiled souls get on track (until their inheritance kicks in)

May 7, 2012

I think it's more nuanced than this. If you "can" get by on a small AUM for several, several years while you hopefully are building a track record, then things are not nearly as bleak as she makes them sound. If your goal is a few million of AUM, increasing gradually each year by a few million each year, it is entirely doable.

May 7, 2012

..

May 7, 2012

interactivebrokers and put in your own money? Otherwise I think your chances are limited.

Best Response
May 7, 2012

Dude at your age you should be focused on bedding the homecoming queen

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May 7, 2012

I figured starting my own HF would boost my chances.

May 7, 2012

lol

May 7, 2012

So a 15 year old guy with access to Google Finance has discovered a 100% reliable profit making system which some of the richest companies in the world with the smartest people in the world have not stumbled across?

Where should I send my money?

May 7, 2012

Are you a qualified HF investor?

May 7, 2012

SHUT UP AND TAME MY MONEY!!!

"Better to remain silent and be thought a fool than to speak out and remove all doubt." --Abraham Lincoln

May 7, 2012

episode of shark tank, amirite?

May 7, 2012
Asatar:

So a 15 year old guy with access to Google Finance has discovered a 100% reliable profit making system which some of the richest companies in the world with the smartest people in the world have not stumbled across?

Where should I send my money?

Cmon dude... Yahoo Finance all the way.

May 7, 2012

Yahoo Finance all the way.

May 7, 2012

lulz

May 7, 2012
Amphipathic:

Dude at your age you should be focused on bedding the homecoming queen

actually would do more for your career no jokes

May 7, 2012

This reads like one of those e-mails from Nigeria

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May 7, 2012

How do you hedge against the price movement of baseball cards?

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May 7, 2012

Arbitrage.

May 7, 2012
Amphipathic:

Dude at your age you should be focused on bedding the homecoming queen

i took the homecoming queen to prom but didn't bed her, do i still get any points for trying?

WSO's COO (Chief Operating Orangutan) | My Linkedin

May 7, 2012

This is like saying, "I ran a half marathon"... well half-congratulations.

May 7, 2012

Are these breakouts predominately on the long side? If so, consider the possibility that your success has been a function of a very bullish market. Everything is going higher, simultaneously. Any technical pattern, that is biased long, is making $. This is not alpha.

If you truly believe you have some skill, find a prop trading firm. Don't even think about a HF unless you have wealthy family members who would be interested in losing millions by entrusting their investments to a teenager.

Ways to make money in bull market using TA lolz:

- Buy at support
- Buy at resistance
- Buy at double bottom
- Buy at double top
- Buy at cup-and-handle formation
- Buy when prices are at x-day moving average
- Buy when RSI says oversold
- Buy when RSI says overbought

You get the point. Any long, on net, is making $. S&P is up ~20% ytd. Many higher betas in relative strength/momentum industries are killing it.

May 7, 2012

I back tested my strategy to 2000.

May 7, 2012

When did Dr. Seuss start writing about the markets? In the unlikely event that you aren't a troll, I would love to hear how lunch/recess went for you in elementary school with you trying to talk to classmates about the markets while they discuss the last episode of Spongebob and the cool videogames they just got for xmas... Please entertain us with some stories from your joyful youth

May 7, 2012

Troll logic: You can deciper a mathematical pattern literally impossible to comprehend even with the most advanced financial minds in the world, but you can't figure out how to start your own hedge fund? Sorry. No.

May 7, 2012

I'm not asking how to start one, rather if you have any advice.

May 7, 2012
Amphipathic:

Dude at your age you should be focused on bedding the homecoming queen

From reading his post I believe that ship has sailed long ago.

May 7, 2012
patternfinder:

I'm not asking how to start one, rather if you have any advice.

If I am ambitious and smart enough to figure out a way to make huge money in the market, then I'll be also smart enough not to waste my precious time here on this pointless forum and actually go start my fucking HF. If you're serious with your plan, you should realize that there is no value spending your time on this internet forum.

May 7, 2012

trade your own account first and make it grow..show phenomenal returns..if you're good, the money will come.

alpha currency trader wanna-be

May 7, 2012

You learn very quickly that there is no such thing as a 'holy grail pattern'. I would suggest you focus on getting into the best possible college instead of deluding yourself.

May 7, 2012

Dude doesn't sound like 15, more like 9...

May 7, 2012

Tell me. How much of the tech bubble can you remember? How closely did you follow the Great Rescission? How many finance and economics courses have you taken?

May 7, 2012

Here's a piece of logic that debunks the entire "I found a pattern" logic.

Correlation =/= Causation

I want you to think about this for a long, long time. Then decide if you still want to start a "hedge fund" based on having found a pattern.

If you think that you're still right, go make a billion dollars, hit Harvard for your honorary PhD, and come back to laugh at us. Until then... well, we'll be making fun of this lol.

May 7, 2012

very niz

mbavsmfin:

I don't wear watches bro. Because it's always MBA BALLER time!

May 7, 2012

HIS POWER LEVEL IS OVER 9,000!!!

May 7, 2012
AndyLouis:
Amphipathic:

Dude at your age you should be focused on bedding the homecoming queen

i took the homecoming queen to prom but didn't bed her, do i still get any points for trying?

By international standards I think that warrants a bronze medal.

May 7, 2012

Learn to drive first.

May 7, 2012

Wouldn't starting a hedge fund get in the way of your tee ball games?

May 7, 2012

Feeding the troll here...but it's likely your strategy does not scale. Is this phenomenon still going to occur when your mythical HF-run-by-a-15-year-old starts feeding large amounts of capital into a security?

May 7, 2012

Of course, I would just buy in scales.

May 7, 2012
Amphipathic:
AndyLouis:
Amphipathic:

Dude at your age you should be focused on bedding the homecoming queen

i took the homecoming queen to prom but didn't bed her, do i still get any points for trying?

By international standards I think that warrants a bronze medal.

i sold myself short; it was the prom queen not the homecoming queen, silver medal?

WSO's COO (Chief Operating Orangutan) | My Linkedin

May 7, 2012

Best of luck to you, patternfinder...

May 7, 2012

Data mining bias. Next...

May 7, 2012

started studying at 8? .... i was watching like mister rogers when i was 8

May 7, 2012
patternfinder:

Of course, I would just buy in scales.

May 7, 2012

Probably my favorite quote on this website. Ever.

May 7, 2012

Dude I am 9 years old and started my own hedge fund around 5 years ago with some leftover allowance. You can join me if you want. I buy in scales all day long

I didn't say it was your fault, I said I was blaming you.

May 7, 2012

step 1: watch this video www. youtube. com /watch?v =5hfYJ sQAhl 0
step 2: take some time to think about it
step 3: stay away from anything remotely related to finance for the rest of your life.

May 7, 2012
Bateman Begins:

Tell me. How much of the tech bubble can you remember? How closely did you follow the Great Rescission? How many finance and economics courses have you taken?

Yeah because Econ & Fin college classes totally help with trading. I heard if you take Finance 101, they have this really cool new module called asset allocation that will teach you how to return 15% annually.

The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.

May 7, 2012

http://www.luminainvestments.com/index.html

I'm sure they wouldn't mind adding a new partner. You'd fit right in.

"Better to remain silent and be thought a fool than to speak out and remove all doubt." --Abraham Lincoln

May 7, 2012
watersign:

trade your own account first and make it grow..show phenomenal returns..if you're good, the money will come.

Or you could always set up lots of different accounts and at least one of them should be 100%+ if you're in volatile companies.

May 7, 2012
Big4Bound:
watersign:

trade your own account first and make it grow..show phenomenal returns..if you're good, the money will come.

Or you could always set up lots of different accounts and at least one of them should be 100%+ if you're in volatile companies.

yeah but if you're serious about getting investors, most want some kind of idea of how your strategy works -__-

alpha currency trader wanna-be

May 7, 2012

I would rather be a 15 year-old asking 20-something finance shitheads about starting a hedge fund, than a 20-something finance shithead who gets a chubby picking on teenagers.

May 7, 2012

On a large sample size your bound to find some correlations. Take 3'000 monkeys and you give them 20 cut out letters and wait for them to shuffle them around. Probability says thats it's highly likely that a least 1 monkey will form a coherent sentence but that doesn't entail that said monkey is literate.

I sold some shares, but on a net basis, significantly increased my ownership.
Jeffrey Skilling

May 7, 2012

Do you also happen to be a Nigerian Prince?

May 7, 2012

Maybe this is a silly comment, but if with so many small hedge funds not being able to make ends meet because they are too small in size....why not buy a small advisor (LLC) that exists with a small amount of assets and bring your improvements to the table. That way you are in business day one.

Is there a website out there that lists "hedge funds for sale"?

May 7, 2012

Gooo on son don't let anyone stop you

May 7, 2012

Obvious Troll is being obvious.

May 7, 2012

There's a big difference between a start-up with "

May 7, 2012

It's a $400m start-up fund started by a guy with a track record at a reputable fund. I'm worried that coming from a non-finance college background with only 2 years of banking experience, maybe I need a more structured environment than dealing just with the PM? Given the choice, would you go for a start-up fund like this or a bigger, established fund?

May 7, 2012
OrangeBanana:

It's a $400m start-up fund started by a guy with a track record at a reputable fund. I'm worried that coming from a non-finance college background with only 2 years of banking experience, maybe I need a more structured environment than dealing just with the PM? Given the choice, would you go for a start-up fund like this or a bigger, established fund?

Unless you've got other funds knocking at your door, then this seems like a great opportunity. You're gonna only learn as much as you put into the position and it's only going to come from being passionate about investing in the first place.

May 7, 2012

What is the fund's strategy, out of curiosity?

The difference between successful people and others is largely a habit - a controlled habit of doing every task better, faster and more efficiently.

May 7, 2012

global long/ short value equity

May 7, 2012

also depends on what your role will be...assuming an analyst.....

May 7, 2012

yes

May 7, 2012

Sounds like a great opportunity to me... I'm trying to make the move from banking finance at a BB to the hedge fund space and would jump at it. Good luck.

May 7, 2012

Starting at a new fund definitely has pros and cons. You'll get a lot of one-on-one time with the PM, which will be great in terms of learning the business. You'll get a lot more exposure to how to run a fund than another analyst would at a more established fund. If this analyst knows what he's doing, and it's clear people believe in him to the tune of $250M, then this could be a great opportunity.

I would suggest thinking long term before you accept an offer. By that, I mean try to get as much in writing as possible. Understand what you're long-term role could become within the fund, how salary and bonus will be structured, exit opps, lock in his support if you want to move to another shop/opportunity for whatever reason, etc. Also understand what his long-term goals are with the fund. Ask the questions a potential investor would so you can feel good about investing yourself in this fund. New funds are more risky for you, so there should be more upside.

May 7, 2012

If they offer you X salary and bonus, ask for 60% * X salary and bonus, and Y bps in the fund. You're young enough to take such a risk - might as well benefit from the upside.

May 7, 2012

As long as the guy has a solid track record, I would kill for an opportunity like that. Sounds like a great opportunity to learn a ton and get in on the ground floor.

May 7, 2012

Thanks a lot guys, Lots of helpful advice here.

May 7, 2012

So many things to be careful of:

1. You mention in your original post he was an "analyst" at a top fund - does he have a track record being a PM?
2. What does the investor base look like? Does one investor account for the majority of the $400mm?
3. What is the structure of the $400mm in terms of lock-ups, liquidity, etc.?
4. Do they have a dedicated IR? Or will you be "jack of all trades" and do marketing work too?

May 7, 2012

Make sure you clarify that the fund HAS $400m AUM and not "is launching and I have commitments for $400m" or "I think with my track record and connections I can round up $400m".

PMs always underestimate how difficult it is to raise capital, particularly for small funds.

As mentioned above, where that AUM comes from is important too. If they are being seeded by a prominent fund (Citadel has a program like this), they aren't getting 2/20. Might be very very low fees in fact, just enough to get going and keep the lights on.

As to your original question, you learn by absorbing and doing, not through a training program. If you realistically have an opportunity at a large HF, then there's actually a debate here. But don't turn down the smaller fund position because you are concerned you might miss out on another opportunity that may or may not come along.

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May 7, 2012

Great posts by valueisoverrated and grosse. I'll also add that I'm curious as to what this fund's asset base looks like from Day One. If it is launching with $400 million then that's a fantastic start, and given that there are only a handful of funds in the world that do this every year these days, it wouldn't be that hard to guess who it was. If that's the case, then it sounds like a great opportunity.

However, as noted by others there are other things that don't necessarily add up. You mentioned the PM was formerly an analyst a top hedge fund, but has he ever managed money? Even a sleve at his former fund? If not, and if he doesn't have a portable track record, then there aren't many ways this fund gets to $400 million from Day One. Not anywhere even close.

This is a very difficult fundraising environment, and you have a few questions that you need to get answers to first. On one hand, I can see why this is intriguing to get in at the "ground floor" of a fund that sounds like it has promise. On the other hand, some of these statements don't seem to align, so you should get clarification on these matters. There is a huge difference between a sub-$50 million launch and $100 million launch and of course anything above that. At $30 million and below, I think you are taking on some significant career risk and you need to make sure there's some way you can participate in the upside (whether it's asking for bps or whatever). On the other hand, you have no professional investing experience and the hedge fund manager will not feel inclined to give you any piece of the performance since there are enough people (as you can see from other commenters) out there who'd even take this role for free just to get some buy-side experience.

I realize that my post has probably given you more questions than answers, but you need to really cover your bases here. All too often, people think "oh wow, start-up hedge fund, so this is great because I can get investing experience AND get in at the ground level!" Don't forget that the guy who is hiring you is probably really shrewd and has all his bases covered too. So, my whole point is that you need to make sure you understand the "risks" side of the equation and not look only at the "rewards." Most hedge funds under $50 million don't get to scale assets or stick around for more than a couple years, and new PM's underestimate how difficult it is to raise funds or generate alpha when they carve out on their own. Don't make that same mistake.

May 7, 2012

is it at a japanese bank by any chance in London?

they are setting up a L/S prop desk with $400m with a former guy from Eton Park.

I went there, was invited to come back to discuss my Long / Short view on Air France.

I declined for the following reasons:

1) fit with the PM was not great

2) it s currently a one man shop

3) i dont like the japanese bank. has been firing people a lot

4) i think i need better training

On the other hand, could be an amazing opportunity that you wont find in an established HF...

May 7, 2012

brb getting mad

*please add more info tho*

May 7, 2012

I think a part of the madness stems from the fact that the people who ask didn't bother doing and due diligence on the in terms of paperwork and expect the info to be handed to them on a platter. I get it either, but I guess after answering it a few times it can get tiring?

May 7, 2012

Sorry to be skeptical, but if you can pm me any trade confirms/evidence I believe I can find you assets. If this is true, it shouldn't be a problem for you.

If the glove don't fit, you must acquit!

May 7, 2012

That is indeed a spectacular record! I'm curious who you are... given I spend some time on 2p2 and follow poker as a hobby. Any live binks? I'd honestly start with some of the hedge funds who are known to have managers that are enthusiastic about poker. I'm sure they'd love your story, and are more likely to give you a shot than some random quant shop. Try to get 10 minutes with David Einhorn @ Greenlight, or talk to Dan Shak. I think I've heard Citadel, QVT and Susquehanna (sell-side) have big poker playing contingents as well. Not saying it's easy to walk into any of these places, but it's worth a shot.

Eventually you're going to need some formal finance training tho... best crack open the CFA.

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May 7, 2012

If you really have 5mm cash you are pretty set assuming you don't blow it on stuff and bad investments. I'm not sure how you'd reach out to some HFs (maybe some of those weird boiler room-esq prop shops) but why do you even want to? You have been a poker pro and managed your own money for like 5 years. Do you really want an office job and all the stress that comes with it? If I had 5mm in cash no way I'd be gunning for that.

I'd recommend buying small apartment buildings where you can get leverage that also cash flow. That is how you can wealth build while also having a great lifestyle. I realize this isn't really what you asked but like I said I'm not sure you'd enjoy an office setting after being independent for so long.

Also, something to think about is that doing what you did with 2-5mm is not even in the same league as doing it with 25, 50, 100, 1,000mm (granted still super impressive). Your strategy could completely implode once you tried to scale. It is a hell of a lot harder to invest massive sums of money. Something to think about before you try to go down that path.

May 7, 2012

hahaha pm me

May 7, 2012

wow boss

May 7, 2012

Is your strategy scalable? Using almost any strategy on 5MM is very different versus that same technique on large amounts of capital. You should also make sure that your algorithms aren't positioned solely for the ride up. There was a lot of beta to be had post-08, but it seems like you did ok in 2011. Unless, of course, you were up 200% until July and then lost a lot of your returns in the remainder of the year. I'm sure you've done it already, but run multi-decade backtests and see what your returns would look like on different market environments.

If your strat is real, and you want institutional investors, you'll also have to analyze your volatility. Most of these large funds don't have too much of a stomach for vol in the years following 2008. Returns speak volumes, especially over a 5 year period, but if you have an insane amount of vol, it could be tougher to sell to clients.

After you have yourself set up as a proper HF (have PBs, administrators, etc.), you could also try a few FoHFs out there. Sometimes they'll seed you, (they most likely won't), but they may also know institutional investors (clients of theirs, that they want to please) who may be looking for a small quant shop and could pass your name along.

May 7, 2012

Interested in learning more about your story!

May 7, 2012

You could crowd fund it from http://www.kickstarter.com/ or http://www.indiegogo.com/ and give people a guide for playing better poker. I think that's pretty creative, although some unforeseen technical detail could be an issue.

Regarding your strategy, you say that it resembles HFT, but what does that mean? Do you have HFT infrastructure?

May 7, 2012

Thanks for the comments.

I trade three uncorrelated strategies I've developed over the years. The most profitable one of them is not super scalable, because it has shorter holding time. The other 2 are to a degree. Is that a big issue? It will have diminishing returns as AUM increases but isn't this expected?
I wrote computer algos to calculate what / when / how much to buy, and how to execute. It has no HFT structure because it doesn't need to compete on speed. Also, after 2009 , I made a personal decision to make all trading market neutral. So the returns have a beta of maybe 0.1 to the stock market.

I've already given up on poker, since it is much harder to make money there. The games are much harder now than before, and there isn't much dead money as before. Plus the government shut it down in 2011.

I do have real estate investments, mostly cheap single family houses. The returns on these are not high enough for me to buy more. I considered the commercial thing, but I still think its better to leave money in my trading account.

Can you guys give me an idea how easy/hard it is to raise money with a hedge fund marketer type who charge a % on the money they bring in? Has anyone had experience working with them? Realistically, I would like to appeal to larger investors/institutions. I've visited a few of those self fund websites, and most can only draw a few hundred K here and there. I don't want to manage my own money plus ten others investing 500k.

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May 7, 2012

Big respect, bro! I have some friends with a similar problem, they're working with liquidity-based strats. Last thing I heard was that they're talking to some swiss-based managers to bring in funds. I don't know how that's going yet, but if you're interested I can get an update, I'm seeing them regularly for related stuff anyway. I'd be interested in a technical aspect: what systems are you using to implement your strats? Sth like Metatrader C++ API?

May 7, 2012

And google says what?

http://icg.Citi.com/transactionservices/home/demo/tutorials29/HedgeFundStartUpGuide_Jan2012/#/6/

TT

    • 1
May 7, 2012

What do you guys trade? If it is exclusively focused on global futures, futures options and/or spot FX, you might want to approach it by starting a CTA and using managed accounts - the economics of it works out a lot better with no minimum capital barrier, particularly when starting out, but requires more mundane operational efforts. Of course such a set-up works best for macro type funds (both quant and discretionary), many of which were started under such a structure and still maintain it.

Out of curiosity, what type of strategy are you employing?

May 7, 2012

It is a VERY VERY tough environment at the moment to start anything. Best of luck to you!

May 7, 2012

Best advice I can give you is to have, or partner with somebody who has, a prodigiously rich father. Alternatively, just take this model to millenium, rentech, etc, and get jobs that don't require you to build a new business from scratch. There's almost no point in even trying to start your own firm at this stage of the game... partially due to your age, but mostly due to the fact that the market has evolved away from allowing hedge fund start ups, no matter how good, to raise meaningful capital.

May 7, 2012

Above advice is probably the most realistic thing to do, and given your age working at another shop is good advice anyway, but capital raising is not completely impossible. It's just improbable from your starting point.

Allocators want to see a track record. You're too young to have a resume to speak for you, so you need to show that you can make money by making money. Especially for a quant strategy, you need to show that your approach actually works in live markets, not just backtesting. And has an acceptable risk profile, scales well, etc. If you're determined to go the start up route, get registered, manage friends and family and your own money in managed accounts, and see if you can actually put up a couple years of good performance. Unfortunately that's just table stakes before you start to have serious conversations about capital raising, but at that point you'd at least be able to get your foot in the door with family offices and HNW individuals. Where the capital raising environment has gotten closer to impossible for small managers is with endowments and the like. But for smaller investors you'd have a shot, and after a few years you'd have some decent brokerage relationships that could help with cap intro.

Good luck!

May 7, 2012

Hi. A HF quant with three years of experience to offer some advice. I've seen a lot of automated strategies so I can roughly validate the success of your model. Perhaps that will be of help should you wish to bring up your model to investors.

You mentioned you are a senior in undergrad. So I'm assuming you have not seen enough of quant investing to know whether a model actually works. I'm assuming your results are backtested. Seeing 10% to 12% returns in a year in Matlab doesn't mean anything unless you substantiate the results accordingly.

If you want my opinion, answer these questions first.

1. Over how long is the backtest period - 2 years, 5 years, 10 years?
2. If you understand this terminology, let me ask whether are the 10% returns over the in sample or out of sample?
3. How many asset classes did you test you strategy on? ( I'm aware of the argument that more doesn't necessarily better. Different markets act differently. But the number of assets does hint on the strength of the model )
4. Are there any cross asset elements? Are the signals for a time series generated solely based on its own time series? In other words, is your strategy something like price of A behaves in this way so we'll buy B.
5. Are there any forecasting / regression elements? You want to be a quant fund so you at least need to know what forecasting / regression is. In short, are you generating signals on a calculated indicator or on the predicted or expected value of an indicator?

I don't mean to boast my knowledge on this field. I've worked long enough to know when one claims to have a profitable strategy and when one actually has a profitable strategy. If you want to be taken serious in the quant investing HF business, you at least need to know answers to the above five questions.

May 7, 2012

What type of HF is it?

May 7, 2012

Sorry for not mentioning it, it's part family office, part long-short macro

May 7, 2012