Managing OPM is a very messy, competitive business - ignoring the attracting funds to manage part, you have significant regulatory requirements to meet before hand.
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For those of you who have done this, could you give some of the steps that you took as well as the reasoning behind it. And for those who have decided not to, what made you decide your route? |
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I chose to trade for a firm instead of this route. At the most basic level, assuming you are a trader, I fail to see why you would want to take a 3% fee for the money you are managing, compared to 50%-90% cut of your own trading profits, using a firm's capital. The decision really comes down to your own goals and trading style.
A good friend of mine IS establishing a fund. Again, at the most basic level his reasoning:
- He is legally qualified from his prior background to manage money.
- His trading approach is a specific, low beta approach.
- He does not have any interest (or ability) to day-trade/short-term position trade.
If you do the math, assuming your trading style is scalable for a fund and also would be supported at a prop. firm (i.e. Not just being long/short positions for months) the point at which it is better to earn < 10% return on X dollars, compared with > 50% return on Y dollars is a LOT of dollars. X needs to be at a minimum 5:1 greater than Y. The question becomes what is easier for you - gaining access to 1,000,000 equity at a firm, or being given 5,000,000 to manage.
I would argue that being a successful trader is much simpler, but much harder. You can literally travel the world without a resume / CV, just your track-record. You are a licence to print cash for ANY firm.
SMW