makes sense, much more transparency, security etc... its also much 'cheaper', cost & tax-efficient to run than any type of fund, even a cayman exempt or a bvi private structure... and you can still charge the client whatever fees you deem appropriate... and if the client accounts are opened with a prime broker outside the US, say the UK for instance, you can still apply mark-ups etc... and if your prime can do sub-allocations and let you trade the pool, you end up running something that works like a fund, except its even better for all parties involved, except of course for the lawyers, accountants, auditors and other questionable-value-adding people... no offense anybody...
absolutely, if you have the right track record / equity curve, and people have good reasons to believe you are very disciplined in all things risk & money management related... whats difficult is to get your first HNW client... then whats difficult is that maybe the 10th HNW person you meet is actually VHNW and wouldn't want to bother for less than a relatively pretty big chunk compared to your current AUM, and you're not sure the liquidity will be there / what you are doing will still work as well with 10 times more AUM, if you are to try & maintain the same sort of performance curve for everybody... but thats a rather nice problem to have ;-)
2cents, Please excuse my ignorance. I am aiming to become a CTA, and liked your idea to run something that works like a fund, but is not a fund. How do you do it? Who is the "prime" and how does he/you make sub-allocations and let you trade the pool?
prime: prime broker. in my limited experience the main primes (UBS, RBS, Deutsche etc etc) are ill-equiped to deal with allocations. you may have to approach an introducing prime broker aka second-tier prime broker etc... they are usually equiped to deal with both institutional & retail size, by necessity... basically the prime extends leverage and allows you to trade according to size of 'equity' on master acct, and applies the allocation weightings as pre-defined by you (pre-trade...) and updated from time to time (client deposits / withdrawals), so as to allocate trades & P&L to all your sub-accts... not sure how well this wld apply to the US... but then again, where there is a will...
Hello: Your track record is too short to be of use in marketing your fund Investors (especially "baby boomers") are becomming savvy about this issue and will not accept that kind of risk Most folks with money are aware that the odds favor simply placing funds in a low cost index fund. Based on your "qualifications" I would say you will have to find investors who are relatively new to managed accounts. Good Luck, Steve
Well said. As I trade options this issue is common. Sometimes talking about nothing, sometimes pretending...mostly pretending HNW are usually better regarding this problem - hard to deal with DD, but they mostly do not pretend they know if they don`t
2cents, Thanks for the answers! Very interesting. What kind of annualized return/dd is needed to attract decent funding? Neighborhood of 30:10? Just curious
for a 'young' manager - ie with a short track record managing current size of AUM - that may be a bit on the low side imo... don't forget you are competing with legions of very polished private banking whores of both genders here, and there are loads of off-the-shelf vehicles that, real or not, boast far better ratios than that.... now if you already have a HNW investor in your pool, thats an entirely different story...