Monday, July 18th, 2016

Forming a Private Investment Fund?

Me and my partner est? No trying to create investment funds? N in which there will be private? trading money pooled from family and friends. Our first asset class to be? options trading to generate higher returns. S? that reading this, assume it is a very risky trading other people’s money, but through? s of the implications? n strategies with limited risk / reward that extends to managing the risk as m? s effective possible. My questions are, at Investment Funds? N private is the best match for us? ? There are capital requirements from the client funds or individual to participate in an asset class? And this asset class can be offered to our private investors (family and friends) and if so? be? association agreement? No internal memorandum by an attorney is enough? Essentially it is a viable idea considering that usually handle m? s of $ 10.000 at the beginning? Thank you!

Comments

2 Responses to “Forming a Private Investment Fund?”
  1. Kevin R says:

    Well, since it’s family and friends you might consider just forming a club for pooled funds. Investment clubs usually require no formal education or securities licensing requirements. The worst battles over money occur between family and friends so write up a good partnership agreement showing how often the club meets and especially how investment decisions are made. Also include clauses for income distribution, and exit clauses for those who want out at some point.

  2. MVD34 says:

    I agree that a club — with formal documentation — is probably the best option for such a small amount of money limited to friends & family.

    Comment one: your odds of success are severely limited by such a small pool of money. If you don’t really know what you are doing it limits the losses…but if you do it is limiting you to one trade at a time….(No serious investor considers trades under a few grand worth the effort. You need at least $10k per trade to get an excellent lowest cost / biggest gain balance)

    Comment two: the semi-pro’s swim in dangerous water. It is relatively easy to organize and swim under the radar so long as you don’t do anything that requires a license or registration. However, if you have trouble, you can run afoul of the feds and state & local regs. Check out how other small firms are organized in your area and follow them. Assume startup costs in the $5 to $10 grand area.

    Comment three. Know the list that requires “special organization” for your local, state, & federal regulators. As a few simple examples, you must be registered to act as a broker or dealer, you must be licensed to act an agent, and you often need a permit or registration (state/county) to run a for profit business.

    This list may also be thought to include a few “best practices” that may or may not be a matter of regulation or law. Things like separate accounts, regular & standardized reporting and tax IDs.

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