Thursday, August 3rd, 2017

thinking to start a hedge fund – will I be labeled the new Madoff?

So.. . I Happen To Have a little less than $ 100k – which I know is a tiny amount for professional capital. And. . . That’s why I am thinking on how to raise additional funds. One of my thoughts to start WAS a hedge fund and offer Investors the option to open account online and deposit money easily. . . Some if this is as stock brokerage or forex online, etc.. Also I am rethinking whether it Will Be a good option to offer minimum interest rate Some per annum – like 6% minimum. Personally, I work as a software developer at a big company so relativamente Creating the website Will Be free in my case – most Will Be Spent money for legal fees and marketing. Finally, I trade options, stocks and bonds for More Than 5 years and 1-2 Strategies That as a safe bet look – so Offering 6% APY looks achievable. But. . . you know. . . Obvious are the obstacle (weak ecomony, lower investor’s trust, no track record… etc.). thanks in advance!

Comments

3 Responses to “thinking to start a hedge fund – will I be labeled the new Madoff?”
  1. Hoopdream - Still Wade's House says:

    I respectfully ask, “Is this a joke?”

    No ones going to invest in a hedge fund that promises 6% return in an economy recovering from a bear market. Hedge funds are suppose to be super profitable and super risky. All they do is place bets. Its not for the faint of heart at all and only millionaires and billionaires are allowed to invest in these funds.

    It sounds like you just want to take peoples money, buy all market index funds which will probably yield 8-9% over the next few years and pocket a 2% management fee. That strategy has alot of holes…you’ll darn near have to lie to pull it off. Youre probably not an SEC licensed securities dealer either…

    BTW, Madoffs was a Ponzi scheme. All long as you buy securities with the money and give people what their money really earns, you’re good to go.

  2. JoeyV says:

    Having started a hedge fund myself, you need to see a lawyer. You can’t start a hedge fund and then hold it out for public investment like an online stock brokerage. Hedge funds are for qualified investors who sign up to be limited partners in a fund offered by you that has an offering memorandum that they need to agree to first (and 100 other complications with your idea). You can’t even allow access to your website without at least some token approval process first. You surely can’t allow people to “invest” online.

    Prior to soliciting any clients for any sort of investment vehicle you need to be straight with the SEC and/or CFTC which means passing the Series [whatever is your thing] and registering your company with the proper authorities (otherwise you can’t even take the exams).

    Guaranteeing a minimum return makes you look like an idiot or a scammer. You can’t “guarantee” a return higher than the risk free rate and your guarantee wouldn’t mean anything anyway as investors would have to sue you for their return and you would just close up shop and bankrupt the entity anyway.

    Anyway, you don’t just start a hedge fund and expect high net-worth individuals and institutions to come to you (those are the only possible clients). You do $30K – $100K wrth up legal work, set up off-shore entities, write offering memoranda, find seed capital, and a whole bunch of stuff I had to learn after spending 10 years in hedge funds beforehand.

  3. Frank says:

    You won’t be seen as Madoff. You’ll be seen as a dilettante. Or a mark.

    Your $100k will barely be enough for the lawyers, auditors, and CPAs that you will need to start. The regulation of hedge funds is complex, and your lawyer will be very expensive – and you can’t go without the lawyer unless you want the SEC to send you to jail. The fact that you can get your website for free is small potatoes.

    You’re forgetting some of the obstacles:
    You don’t have an MBA or a degree in finance. You have zero experience in the field. The only people who will invest with you are family and fools.

    You’re going to offer a 6% minimum interest rate? (Now you’re a bank and need more lawyers because you called in interest rate rather than rate of return.) Where is this minimum coming from? If you put their money somewhere that returns 4%, how do you keep them at a 6% return?

    You can’t. The only way is to turn it into a pyramid scheme, which would make you Madoff, and there’s plenty of room in the federal prison.

    Please keep your money. Invest it yourself if you must. Better to play with 20 grand and let the professionals invest the rest. Don’t blow your nest egg on lawyers just to find out that you can’t get investors. Or worse, that you get investors but you can’t get the return that you think you can.

    After the lawyers take your money, you’ll find out that your promise of a 6% minimum return will be nothing but a big joke, and nobody will invest with you unless they are related to you. Even if you were my brother, you are so clearly away from reality with this that I wouldn’t invest. Please don’t lose your $100k on this lesson.

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