4 ms·

This is actually way too optimistic. Your first 1-2 seed investors will: - Only pay 1 and 10 (1% fixed fee and 10% of PNL) - They will also get ownership of

by HFguy 4y ago

This is actually way too optimistic. Your first 1-2 seed investors will: - Only pay 1 and 10 (1% fixed fee and 10% of PNL) - They will also get ownership of the actual fund management firm and will get that in the form of 20% of REVENUE (not equity, revenue, think about that) This is one reason new fund formation is way down. The economics are bad for years. Know a bunch of HF people that started vc-backed tech firms instead. The other reason is 10+ year run where stocks, bonds, private firms and real estate just went up. No need for diversifying return streams.

HFguy 4y ago
BTW, data costs also too low. Just a BB terminal around 30k and a lot of extra data from BB costs extra (can be 200-300k per additional product). For quant strategy probably looking at 500k up to 2M for data initially. And you will likely be at a disadvantage to existing firms that have been collecting data for years. And that is at the low end. Spent many millions per year for 1 strategy at last large firm. And that was small fraction of total firm spend.
ackbar03 4y ago
I guess if you have a reasonably profitable strategy it probably just makes more sense to run it with your own money? I guess the only reason why you would want to trade as a hedge fund is if you want to scale up, but most strategies aren't really that scale-able anyways from what I understand, since when you start trading in any real significant size you start moving the markets.
chollida1 4y ago
Ha, you need a better network:) I don't know too many people who have started funds in the past 5 years, but of the 3 who did, none gave up any ownership in the management firm. That's a suckers game and the only people who would need to give up any ownership are people who are very green:)
- collegeburner 4y ago
  facts, the people i know who started funds in the past few years gave no ownership. they alsp made the numbers work down starting at about $75mm iirc, tho it's a lot easier once past $500mm.

by HFguy 4y ago

HFguy 4y ago

BTW, data costs also too low. Just a BB terminal around 30k and a lot of extra data from BB costs extra (can be 200-300k per additional product). For quant strategy probably looking at 500k up to 2M for data initially. And you will likely be at a disadvantage to existing firms that have been collecting data for years. And that is at the low end. Spent many millions per year for 1 strategy at last large firm. And that was small fraction of total firm spend.

ackbar03 4y ago

I guess if you have a reasonably profitable strategy it probably just makes more sense to run it with your own money? I guess the only reason why you would want to trade as a hedge fund is if you want to scale up, but most strategies aren't really that scale-able anyways from what I understand, since when you start trading in any real significant size you start moving the markets.

chollida1 4y ago

Ha, you need a better network:) I don't know too many people who have started funds in the past 5 years, but of the 3 who did, none gave up any ownership in the management firm. That's a suckers game and the only people who would need to give up any ownership are people who are very green:)

collegeburner 4y ago
facts, the people i know who started funds in the past few years gave no ownership. they alsp made the numbers work down starting at about $75mm iirc, tho it's a lot easier once past $500mm.