How to get into money/fund management?

I'm interested how you can get into the money/fund management area. Either as a fund/money manager of your own fund, or someone elses fund/money. I'm not talking about getting a job with an institution here, just money management.

Please share your experiences here. What are the steps one should take, what kind of returns should you have and what kind of risk/drawdown. Share your success or failure stories.

Please only post if you have personal experience, or someone close to you was involved in this. Let's leave the "general knowledge" stuff or "I heard/read somewhere" stuff out of this discussion.

As i know, wolrd is full of people (that work or are hedgefund/istitutions) looking for good traders, all you have to do is have a nice demo track-record to start, and you can also post it on any forum, and propone yourself, if u'r good no much time will pass between you will get contacted from someone, with good track-record i don't mean 200% profit monthly, a 15% profit with 5% drawdown could be acceptable, the hard job is just have good and consistent results in trading, i think.

Hello,

my contracts with the investors are 3 types and minimum for 3 months period:
1. The Investor takes all the losses, limited to 20% of the started amount. Investor receive 70% from the profit, i receive 30% from the profit. The contract is minimum for 3 months. The contract ends if there are 20% losses . For example : the investor start with 10 000 , he will receive minimum 8 000 . The losses are limited to 2 000

2. Trader give 20% (2 000 for example) of the acount amount as garantee, and is limited to that 20% losses, the investor gives 80% ( 8 000 ). Trader takes all of the risk. Profit sharing 50/50 , or 60% for investor 40% for the trader.

3. Fixed monthly interest rate 1%, 1,5% or 2%. Dividents payed once on every 3 months. Trader takes all the losses, and everything above the fixed divident rate.


I recomend to do not start with taking risk or fixed rates till you have enough money to cover the losses.

There are many investors who would like to give you chance. Just have to search them.

Don't take money from people who are in debt, or who want to give you borrowed money.

Take money from rich enough people... you will have much bigger problems with the small investors.

Don't make monthly target higher then 5%-10%. You will live much better (and much longer )

Dont work on all acounts together as you can do with multiterminal. It is better to work every day with different acount or group of accounts (if you have more than 3 accounts). You will have always investors, even if you loose some of them .

Best regards and good luck.

FX Predator

I thought I wanted to trade OPM, but it was a disaster for me. I became a CTA and traded futures first then Forex. It took me three tries to pass the series 3.

I did not make one penny and I wasted a lot of time.

now I lose my own money.

ES

FXPredator contributed some very good information. It's true that there is no such thing as an industry standard. You create the amount of risk that suits you and your clients needs. I would add that it is a good idea to create an LLC to protect yourself. Creating an LLC allows you to trade under your company name and limits your personal risks substantially. It's not neccessary if you have a POA, but still a good idea to have one for tax purposes.

It's generally best to have several years of profitable records to show to your clients. Ideally each quarter should show a higher watermark than the last. I require my traders to trade "underneath" me with their own money for a min. of 3 months to ensure they are ready to go live.

There are obviously many different ways to get involved in fund management, but if you are going wish to become a money manager, the easiest path is probably becoming a (CTA - commodity trading advisor) and managing client's money under an SMA (separately managed account) structure. Each client would grant you limited power of attorney status over their accounts, and you could control all sub client accounts through one master account, using a % or lot allocation system.

Obviously a prerequisite to even thinking about money management is a consistent track record. Even with this, however, there are other phycological pitfalls to consider. For instance, if you are a discretionary trader - even one with a longstanding, consistent personal record - the additional emotional strain of professional fund management could be detrimental to one's trading. Going from 10 lot trades to 100s of lot trades is something that is difficult, if not impossible, to really physiologically prepare for. If you are a mechanical trader, the transition will likely be considerably easier, since the inevitable change in one's trading emotions will not be a tangible factor, as long as you adhere to your proven methodology. In all likelihood, unless you are extremely iron-wiled, those old trading demons of fear, hope, greed and ego - emotions that you thought that you had conquered long ago - will likely resurface in some shape or form, driven by the new phycological burden of all of your trades being watched by your eager and trusting clients. The bottom line is that as soon as you start managing money, your mistakes are no longer purely your own; they are shared and felt by all of your clients. I would suggest considering long and hard how this potential change in emotion (at least at first) will effect your trading, and do whatever you can to protect against this possibility.

The second step, of course, is to get clients. There are a million ways to do this, but I won't get into a sales lecture here. The return/drawdown question that you asked brings up a good point: different clients have different risk/reward appetites and expectations, so there really isn't a 'right' answer to that question. Obviously, you want your annual return to annual drawdown ratio to be as high as possible, but it certainly isn't as simple as that. For instance, when I first started managing OPM, I was much more focused on having higher returns and less focused on the potential drawdown, as long as that drawdown was in MY emotional parameters. Some clients will have a higher risk appetite, and will be fine with a higher return/higher drawdown combination; others, however, will likely prefer a lower return/lower drawdown model. To increase marketability across a variety of different personalities, I would suggest developing several different risk models - even if they all trade the same overall strategy, just at reduced fractional sizing. That way, old conservative Joe, who likes the equity smoothness of his cds and commercial paper, will be just as interested in your fund offerings as bob who loves anything that could potentially increase his returns. Ultimately, the longevity of any client relationship that you have will be dependent on whether or not their risk/return appetite is compatible with your fund's risk/return characteristics.

Best of luck,

Chris

Do you guys recommend any good MA’s from personal experience?