Possible for average joe to start a hedge fund?

rookieMan

PHG wrote: »

Hi OP,

You say over last 2 years your returned 5-10%, Which is it? Why would they invest with you if their employer does an pension match, e.g. they put in 5% and the employer matches it?

Not having a pop here but I honestly think you are looking way ahead of yourself. Why?

1. You don't have enough capital
2. Fees, regulation everything will stop you doing this. Even the cost of a website atm.
3. Why do you need other peoples money?
4. Are you aware of how different investing is once it is someone elses money?? It messes with your head!
5. Why not just use your own cash and forget everyone elses? DO NOT TAKE OUT A LOAN!!
6. What happens if you lose your friends and families money, can they and you accept this? They might say yes but I promise you could lose friends over this.
6. Many of us have been there where we made a little cash and started thinking like this after a decent run then lost it. Concentrate on your edge and keep going. Sleep on it for a bit more on it!
7. I know 2 successful traders who trade for themselves. Both have considered a fund and both said no. Why? cause they couldn't be bothered dealing with people and would rather live their own life without the grief. I know they do well but how much they do or do not make I will never know. They have decent houses, cars and life and that is as far as they tell. They are not millionaires, just earn enough to keep them and their family content.
8. I know of 1 more trader through one of them that was doing very well, took on a number of clients after a year of success. He went to the wall!! AFAIK he has not traded since and gone quiet as he felt so guilty for messing up with other peoples cash who trusted him. It wasn't a huge amount but did the damage to him.

Hope that helps

PHG

Thanks for your point of view on this. You are right about regulations. To answer your question on why people might invest, if your savings account offers 0.0x% return and then you are losing money due to inflation. That doesn't mean I am suggesting that one should invest all their money, everyone has different risk apatite but doesnt mean people dont invest beyond pension.

Anyways, I thought that if I can come up with a investment strategy with low risk and stable return, then there might be a way to spread the knowledge and benefit larger community. I am totally fine taking profits to myself.

RedRochey

I used to work at a hedge fund of sorts and the lads who started got funding of a good few million from a former boss, my point being a lot of funds get backing from someone rich to start with

Colonel Claptrap

rookieMan wrote: »

Anyways, I thought that if I can come up with a investment strategy with low risk and stable return, then there might be a way to spread the knowledge and benefit larger community. I am totally fine taking profits to myself.

I struggle to see how your investment strategy lends itself to being a hedge fund specifically.

Why a hedge fund?

Glass fused light

Colonel Claptrap wrote: »

I struggle to see how yout investment strategy lends itself to being a hedge fund specifically.

Why a hedge fund?

The question is "do you know what a hedge fund is"

rookieMan

Colonel Claptrap wrote: »

I struggle to see how your investment strategy lends itself to being a hedge fund specifically.

Why a hedge fund?

Maybe hedge fund wasn't the right choice of words. I meant alternate investment fund.

rookieMan

StockTwat29 wrote: »

I used to work at a hedge fund of sorts and the lads who started got funding of a good few million from a former boss, my point being a lot of funds get backing from someone rich to start with

Good for those lads. They had built their credibility and hence got the backing. I doubt that will be true in my vase unless I can show a track record of stable return and have decent write ups/marketing material on how funds are used and why its low risk

JeffKenna

Can I invest 1m please?

JeffKenna

Can I invest 1m please?

Heres Johnny

Lack of capital and liquidity
You will be buried in regulation and legal issues
Lack of credibility
Asking on boards instead of the correct places


Almost impossible to get investors, please don't pressure your friends and family

Iang87

If you're targeting at retail investors then the fund will need to be a UCITS structure or an AIF structure.

There are definite rules around both regarding cash and borrowing. You'd also need to hire an administrator along with a Depositary for safekeeping. These would be eating into the fund. In terms of the startup costs I wouldn't lose sleep on these as you can write them into the funds budget over a specified period. Make it 5 years or so and the fund won't feel the payback.

Your issue will be the retail side of this. Since the crash the retail investor is so protected it makes it hard for an average joe to get 5m for friends and family to start a fund.

I'm not sure how aware you are of certain rules and what your strategy would be but imagine you decided Apple was where you'll make all your money. Under UCITS restrictions you can't have Apple make up more than 10% of your portfolio.

I'm not going to say you can't but I will say it will be incredibly difficult to pull off. Best of luck if you do go forward

Glass fused light

Iang87 wrote: »

If you're targeting at retail investors then the fund will need to be a UCITS structure or an AIF structure.

There are definite rules around both regarding cash and borrowing. You'd also need to hire an administrator along with a Depositary for safekeeping. These would be eating into the fund. In terms of the startup costs I wouldn't lose sleep on these as you can write them into the funds budget over a specified period. Make it 5 years or so and the fund won't feel the payback.

Your issue will be the retail side of this. Since the crash the retail investor is so protected it makes it hard for an average joe to get 5m for friends and family to start a fund.

I'm not sure how aware you are of certain rules and what your strategy would be but imagine you decided Apple was where you'll make all your money. Under UCITS restrictions you can't have Apple make up more than 10% of your portfolio.

I'm not going to say you can't but I will say it will be incredibly difficult to pull off. Best of luck if you do go forward

With respect setup costs can be budgeted per accounting policies but the initial investors ultimately carry that cost. Plus even if the OP managed to label into an existing fund and levered off this saving the setup cost have to be funded up front.

Heres Johnny

My pension fund has achieved 8.9% average return since I started it. It's classified as high risk as I'm still young I'm happy to leave it there.
Projecting 10% in a safe (low risk) over 2 years is bonkers.
Risk is uncertainty. You can't project 10% without any level of uncertainty

rookieMan

Heres Johnny wrote: »

My pension fund has achieved 8.9% average return since I started it. It's classified as high risk as I'm still young I'm happy to leave it there.
Projecting 10% in a safe (low risk) over 2 years is bonkers.
Risk is uncertainty. You can't project 10% without any level of uncertainty

I didn't say no risk and hence I didn't claim no level of uncertainty. However, I am sure the risk that your pension fund is taking is much higher than what I am taking. You may continue to believe its bonkers and can continue assuming that pension funds give best risk to reward ratio.

pedroeibar1

Pathetic how stupid & low the comment on this forum has sunk, more suited to AH.

antoinolachtnai

rookieMan wrote: »

I didn't say no risk and hence I didn't claim no level of uncertainty. However, I am sure the risk that your pension fund is taking is much higher than what I am taking. You may continue to believe its bonkers and can continue assuming that pension funds give best risk to reward ratio.

How can you say that you offer a low risk investment when you have never invested during or traded through a recession? I don’t think you realize how implausible this sounds.

Do you have some sort of theory or model which explains your exuberant optimism?

pedroeibar1

Glass fused light wrote: »

With respect setup costs can be budgeted per accounting policies but the initial investors ultimately carry that cost. Plus even if the OP managed to label into an existing fund and levered off this saving the setup cost have to be funded up front.

Aaah. An 'expert' :rolleyes:. Perhaps you might like to differentiate between a UCITS management company, an authorised Alternative Investment Fund Manager (AIFM), a self-managed UCITS investment company and an internally managed Alternative Investment Fund which is an authorised AIFM.?
Or perhaps give us your take on designated persons and Regulation 124(3) of the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1) (Undertakings for Collective Investment in Transferable Securities) (Amendment) Regulations 2017? (Bet I will be waiting!:P)

(Did you miss the bit saying all this is for a guy who wants to start a fund with 10k !!)

Glass fused light

pedroeibar1 wrote: »

Aaah. An 'expert' :rolleyes:. Perhaps you might like to differentiate between a UCITS management company, an authorised Alternative Investment Fund Manager (AIFM), a self-managed UCITS investment company and an internally managed Alternative Investment Fund which is an authorised AIFM.?
Or perhaps give us your take on designated persons and Regulation 124(3) of the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1) (Undertakings for Collective Investment in Transferable Securities) (Amendment) Regulations 2017? (Bet I will be waiting!:P)

(Did you miss the bit saying all this is for a guy who wants to start a fund with 10k !!)

Did you bother to read the thread, or are you just :rolleyes:

pedroeibar1

Glass fused light wrote: »

Did you bother to read the thread, or are you just :rolleyes:

Go read page 2 of the thread. But I guessed I'd not get an answer to the question I put to you.. So, I'll make it easier. How many INEDS does OP need and what is their usual annual fee?

Glass fused light

pedroeibar1 wrote: »

Go read page 2 of the thread. But I guessed I'd not get an answer to the question I put to you.. So, I'll make it easier. How many INEDS does OP need and what is their usual annual fee?

Yep your all :rolleyes:

As for the questions that's why one pays the rather large legal fees at the start of the process and one makes sure to get the answers in writing.

As for the OP the answer to anything is zero as the OP needs to continue doing what ever they are doing and leave the idea of investing other peoples money alone?

rookieMan

Iang87 wrote: »

If you're targeting at retail investors then the fund will need to be a UCITS structure or an AIF structure.

There are definite rules around both regarding cash and borrowing. You'd also need to hire an administrator along with a Depositary for safekeeping. These would be eating into the fund. In terms of the startup costs I wouldn't lose sleep on these as you can write them into the funds budget over a specified period. Make it 5 years or so and the fund won't feel the payback.

Your issue will be the retail side of this. Since the crash the retail investor is so protected it makes it hard for an average joe to get 5m for friends and family to start a fund.

I'm not sure how aware you are of certain rules and what your strategy would be but imagine you decided Apple was where you'll make all your money. Under UCITS restrictions you can't have Apple make up more than 10% of your portfolio.

I'm not going to say you can't but I will say it will be incredibly difficult to pull off. Best of luck if you do go forward

Thanks for your input. Really appreciate a sane input here. I understand the rules around exposure when trading but I dont know how these rules apply when not trading. For instance, imagine I take gold from someone as a collateral for giving out loans. Does that mean the loan given to the person cant exceed 10% of my portfolio or loans given on gold as collateral cannot exceed 10% of portfolio or all loans cannot exceed 10% of portfolio? Logically, I think it should be mean the loan given to the person cant exceed 10% of my portfolio which is not an issue at all.

rookieMan

antoinolachtnai wrote: »

How can you say that you offer a low risk investment when you have never invested during or traded through a recession? I don’t think you realize how implausible this sounds.

Do you have some sort of theory or model which explains your exuberant optimism?

There are various alternate investments that dont involve trading for profit. For instance, lets say I take $100 worth of gold (today's price) from someone and give out $50 loan to him at 5% APR. The contract could say that if gold collateral value would drop to $80, I have the right to liquidate gold and end the debt contract unless more gold is collateralized to keep the debt contract going. Obviously there is a risk here. If gold prices drop so fast that a sell of gold for $80 doesnt fulfill to get back atleast $50. I will let you decide by looking at historical gold prices on how risky is the assumption that an attempted sell of gold for $80 wont end up yielding atleast $50.

Not all investments revolve around equity market or trading commodities.

pedroeibar1

Glass fused light wrote: »

Yep your all :rolleyes:

As for the questions that's why one pays the rather large legal fees at the start of the process and one makes sure to get the answers in writing.

As for the OP the answer to anything is zero as the OP needs to continue doing what ever they are doing and leave the idea of investing other peoples money alone?

As I expected, no answers thereby showing you have no idea. Almost all the posts on this topic are drivel. The OP has zero hope of proceeding as is evident from #1. An investment firm that 'generally' knew what it was at but had a weak paper trail, took its eye off the ball and fell foul of the Regulator. The result is HERE

el Fenomeno

rookieMan wrote: »

Thanks for your input. Really appreciate a sane input here. I understand the rules around exposure when trading but I dont know how these rules apply when not trading. For instance, imagine I take gold from someone as a collateral for giving out loans. Does that mean the loan given to the person cant exceed 10% of my portfolio or loans given on gold as collateral cannot exceed 10% of portfolio or all loans cannot exceed 10% of portfolio? Logically, I think it should be mean the loan given to the person cant exceed 10% of my portfolio which is not an issue at all.

Neither UCITS or RIAIFs can accept commodities or any physical assets as collateral.

pedroeibar1

rookieMan wrote: »

There are various alternate investments that dont involve trading for profit. For instance, lets say I take $100 worth of gold (today's price) from someone and give out $50 loan to him at 5% APR. The contract could say that if gold collateral value would drop to $80, I have the right to liquidate gold and end the debt contract unless more gold is collateralized to keep the debt contract going. Obviously there is a risk here. If gold prices drop so fast that a sell of gold for $80 doesnt fulfill to get back atleast $50. I will let you decide by looking at historical gold prices on how risky is the assumption that an attempted sell of gold for $80 wont end up yielding atleast $50.

Not all investments revolve around equity market or trading commodities.

What has this got to do with starting a hedge fund? The plan you outline is laughable. OP you dig yourself deeper into showing your investment ignorance with every post. The word is 'alternative' (investments) and not 'alternate' which you repeatedly use. Also, FWIW do you realise that you need regulatory approval to set up as a lender?

rookieMan

pedroeibar1 wrote: »

What has this got to do with starting a hedge fund? The plan you outline is laughable. OP you dig yourself deeper into showing your investment ignorance with every post. The word is 'alternative' (investments) and not 'alternate' which you repeatedly use. Also, FWIW do you realise that you need regulatory approval to set up as a lender?

Sure you know all the terms and regulations. I wish you also had humility and intention to guinely help others for us to have a sane conversation. If your motive in life is to bring others down, then I wish you best of luck.

drunkmonkey

In fairness there's a pretty active investment form here, most of the guys would be upset if they didn't make in a day the kind of returns your hoping to offer after a few years.
Even most of the big tech companies have made way over your 10%, you would have been better sticking your money in Microsoft 2yrs ago, no effort and a lot more return.
A boards hedge fund has already been discussed and there's a file on some of our investment picks with returns on it from last year floating around somewhere.

I don't think your anywhere near capable of picking good investments yet with the poor return shown so far.
If you think you've the right stuff start day trading for your self. It you can double €1 for 31days straight you'll have enough to start your hedge fund.

Glass fused light

pedroeibar1 wrote: »

Glass fused light wrote: »

With respect setup costs can be budgeted per accounting policies but the initial investors ultimately carry that cost.  Plus even if the OP managed to label into an existing fund and levered off this saving the setup cost have to be funded up front.

Aaah. An 'expert' :rolleyes:.  

pedroeibar1 wrote: »

As I expected, no answers thereby showing you have no idea. Almost all the posts on this topic are drivel. The OP has zero hope of proceeding as is evident from #1. An investment firm that 'generally' knew what it was at but had a weak paper trail,  took its eye off the ball and fell foul of the Regulator. The result is HERE

I have no idea what it was in my post above that triggered you, but a big part of my job was to listen to the chest beating and willy wagging and translate that into a language the other parties could understand.  Sometimes that just involved me having to listen to the very well paid experts have their say and gently pointing out that what was said was very true and informative but not helpful eg. the OP doesn't understand the language involved in investing.

RedRochey

https://www.bloomberg.com/news/articles/2019-06-19/what-s-it-take-for-a-new-hedge-fund-to-make-it-250-million?utm_medium=email&utm_source=newsletter&utm_term=190620&utm_campaign=ritholtz

Little bit of back up from the lads at Goldman Sachs