Planning to launch a small scale HF. AUM about 1M. Looking for people who have launch such small scale funds. Want to learn more about their experience. Or if anybody know any hedge fund manager who started such a small scale fund.
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$1m AUM isn't a hedge fund, it's an Interactive Brokers trading account.
Exactly. And there's no problem with that. HF annual running costs are at minimum 200-400k. Keep it in IB, establish a track record with 1-20mm AUM, then raise assets and form a hedge fund (50+ mm AUM).
This doesnt seem that crazy to me. Won't get institutional investors here obviously but can scale with performance. Plenty of small hfs trade on ibkr...
Hi. You mentioned that there are plenty of HFs on IBKR. Can you please let me know if you have contacts for a couple of them? Can you please share their names maybe. so that I can get in touch with them.. to learn more about the process. thanks
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Legal costs wouldn't make it doable. Too high as a % of only $1M
i can help. for just 20k
Rule of thumb is 50mn to form one and it’s freaking hard to get that kinda funding even with years of experience. Knew a MD who got out of DB prior to 2008 and tried to start one with another guy, they couldn’t hit 50mn and decided it wasn’t worth their time.
People always shit on these. I'll take the bait, as someone who has worked at an allocator and a fund, both institutional money. What does "starting a hedge fund" mean to you? What is the goal? If you just want to trade all day, live on your performance, and think you can generated 20%+ returns that will justify your time and energy on $1mm, you could potentially make this happen. At this level of AUM you will make less than a first year banking analyst even assuming very strong performance (think about the economics here...) You will also unlikely ever raise institutional money and will spend your entire life fighting for drips and drabs of "rich guy" money, $250k at a time. Just do a basic back of the envelope and ask yourself whether the realities of a $1mm AUM fund are appealing to you. If all you care about is trading and you don't care about getting rich, maybe this is worth it. If you have dreams of riches, fame, a prestigious lifestyle, or even just getting your foot in the door of the industry via proven success, there are better places to look.
A close friend of mine started one of these in college, and was able to get a lot more money once he had a track record of about a year. After hitting mid 8 figures AUM he ended up taking a seat at a large fund, citing breaking out of HNW to institutional clients was absurdly difficult. For what its worth, when I caught up with him last it sounded like he regretted not continuing on with his fund, so who knows maybe it is not a bad idea to get started and see where it goes.
Whitewalker: Thanks for sharing with this info, This is very interesting....
Thanks to everyone who contributed to my question. I feel that I need to provide a little more color to my question. First, the reason why I consider the idea of starting a fund as viable is because, some people who have seen my track record want to seed me with capital. So, basically I have 2 ways to go. 1 - Take money and add it to my personal IB/TDA account and work from there and take commissions if I make money. 2 - starting a fund with whatever capital I have now, and just work hard for 2-3 years and prove that I can produce nice gains. If I do that, I believe that I can find other investors if not, I may just stop dealing with a fund and just return capital to investors. However if I succeed then I feel that I have a realistic chance of making something worthwhile and having a legitimate chance of striking big (100M+). Again, these are my thoughts and I am about to make a decision in the coming week. As I need to start the process.
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