Comments on: How to Start a Hedge Fund – and Why You Probably Shouldn’t https://mergersandinquisitions.com/how-to-start-a-hedge-fund/ Discover How to Get Into Investment Banking Fri, 07 Jul 2023 15:43:16 +0000 hourly 1 https://wordpress.org/?v=6.2.2 By: M&I - Brian https://mergersandinquisitions.com/how-to-start-a-hedge-fund/#comment-797839 Wed, 26 Apr 2023 13:45:26 +0000 https://www.mergersandinquisitions.com/?p=4540#comment-797839 In reply to Brian.

Thanks for adding that. This article is meant to dissuade people who think they can start their own hedge fund because they did well managing their $100K personal accounts or got a 400% return during covid or something like that.

If you actually have real experience working at a larger fund, a real track record based on a large capital base, and institutional connections, sure, starting a hedge fund can work out well for you.

That said, even if you perform well, it’s still quite different from simply working at a large fund because you’re also managing a business and all the people/responsibilities that come with it. I’ve never heard someone say that starting their own fund was comparable to staying at a larger fund in terms of stress/hours. But sure, each situation is different, so maybe this has been true for you.

]]> By: Brian https://mergersandinquisitions.com/how-to-start-a-hedge-fund/#comment-797779 Mon, 24 Apr 2023 17:00:04 +0000 https://www.mergersandinquisitions.com/?p=4540#comment-797779 I’ve run my own fund for nearly 3 years now, and it has been very rewarding. Obviously, everyone has their own experience, but IMO this article is *way* too negative on the subject, though I realize it was written a few years ago. Many investors are now attracted to smaller startup funds that have a strategic edge and good risk management principles, so success can come without raising millions and millions of $$$. That is exactly what has helped me grow. Also, the draw on personal time has not been substantial at all vs what it would be working at a larger institution. I can largely make my own work schedule.

It is definitely not for everyone, but for anyone reading this article, don’t be overly deterred by what’s written here. Do your research. It could turn out to be a good option for you just as easily as not.

]]> By: M&I - Brian https://mergersandinquisitions.com/how-to-start-a-hedge-fund/#comment-767910 Wed, 09 Nov 2022 20:40:03 +0000 https://www.mergersandinquisitions.com/?p=4540#comment-767910 In reply to Brandon.

Yes, well, the point is that there is a massive difference in strategies based on your capital. A strategy that works for trading $10K will not work at the institutional level when trading $100 million or more. Something like turning $10K into $18M is amazing for an individual, but most LPs would question the result or at least question whether it can be replicated at a greater scale. Quant funds do have to disclose something about their strategies if they have outside investors.

]]> By: Brandon https://mergersandinquisitions.com/how-to-start-a-hedge-fund/#comment-767738 Wed, 09 Nov 2022 07:35:00 +0000 https://www.mergersandinquisitions.com/?p=4540#comment-767738 This was a good article. Really talked some sense into me. However, it’s a shame there are capital and educational barriers to entering the hedge fund space when there are probably plenty of individuals who consistently beat the SPY by a long shot with their meager capital. Dan Zanger is a good example – he parlayed 10k into 18M in a year and previously built pools for a living. He is an anomaly I will admit. It surprises me somewhat that investors expect to gain insight into your high-performing trading strategy as a condition for investing in your fund, while most algorithmic trading firms are extremely protective of that information and have even come after ex-employees for sharing knowledge with their next employer. Anyway, good food for thought.

]]> By: M&I - Brian https://mergersandinquisitions.com/how-to-start-a-hedge-fund/#comment-761395 Wed, 14 Sep 2022 19:16:33 +0000 https://www.mergersandinquisitions.com/?p=4540#comment-761395 In reply to Brian Vegas.

Good luck!

]]> By: Brian Vegas https://mergersandinquisitions.com/how-to-start-a-hedge-fund/#comment-760016 Sat, 10 Sep 2022 02:24:37 +0000 https://www.mergersandinquisitions.com/?p=4540#comment-760016 Successful businessman, and also a successful trader at the personal level(100%+ returns every year-I know unimpressive compared to others). Yup, everything you stated rings 100% true. Yup, I think I will stick to what I am already doing(all my trades and research are done on a smart phone from anywhere), the starting a hedge fund idea sounds like a bad one. Your alternative suggestions are good ones.

]]> By: M&I - Brian https://mergersandinquisitions.com/how-to-start-a-hedge-fund/#comment-742179 Mon, 30 May 2022 04:08:35 +0000 https://www.mergersandinquisitions.com/?p=4540#comment-742179 In reply to Da.

It depends on how big a fund he wants to start and which strategies he wants to use. If he plans to keep it in a similar size range and use the same strategies, sure. If he wants to raise $1 billion or $10 billion to start the fund, that would be a lot more difficult because he has no track record in that AUM range, and trading a personal account, even up to $100 million, is still very different from a multi-billion-dollar account.

]]> By: Da https://mergersandinquisitions.com/how-to-start-a-hedge-fund/#comment-742172 Mon, 30 May 2022 00:36:45 +0000 https://www.mergersandinquisitions.com/?p=4540#comment-742172 I know a person who traded his own personal account and did almost 40% a year for 14 years, turning it into a little less than $100M own money.

Will this person be taken seriously if he starts a hedge fund, if he even wants to?

]]> By: M&I - Brian https://mergersandinquisitions.com/how-to-start-a-hedge-fund/#comment-739166 Wed, 20 Apr 2022 17:15:17 +0000 https://www.mergersandinquisitions.com/?p=4540#comment-739166 In reply to Charlie Debelen.

The answer to this question is “Do not invest in hedge funds unless you are an experienced, high-net-worth investor who is comfortable potentially losing everything you put in.” If that is not you, put the money in an index fund instead.

]]> By: Charlie Debelen https://mergersandinquisitions.com/how-to-start-a-hedge-fund/#comment-735227 Thu, 07 Apr 2022 15:35:21 +0000 https://www.mergersandinquisitions.com/?p=4540#comment-735227 With your permission, I have a question to ask, which is not exactly related to your topic. I recently met a hedge fund manager (family and friends partnership) who happened to live in my neighborhood. I’m retired as a prior Federal employee with an active TSP account. He claimed that his HF return was 18% since its inception in 2019. I’m a bit interested of becoming a partner with a $10K investment to put in. What good questions should I ask before deciding to invest?

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