| Topic Name: |
Hedge Fund-Dot coms of the 21st Century |
| Message Name: |
Quick calculation |
| Date Posted: |
01/28/2002 |
| In Reply To: |
depends on what your average returns are on that 10 mill and what your performance fee is. also how big is your operation, how many people managing. 10 million if you make say 25%, then take 25% performance fee thats 2.5 mill= 625k performance fee. yes you cant get rich off of that, but if you are good word of mouth spreads. Of course nobody sets out with their goals to fail. I will never have failure to be a goal or a possibility, it is my job to keep that in check day by day. With low overhead and a couple managers, I dont see how this can be even remotely similar to a dot.com type of situation. I thank you for your insight, yabai. I am sure it is a bumpy road.. but success is possible. |
| Message: |
Let's assume that you do return 25% and that your performance fee is 25% with zero hurdle. This already is rich, both on the return, and on the performance fee someone is willing to give up on a newbie without a track record. Much more common is 15-20% with a hurdle rate, usually no less than 8% or so. Average long-term return for ALL hedge funds is barely above the market, which is what you'd expect, since a diversified collection of hedge funds with many styles IS the market.
So you take your 625K and pay off your traders (70-100K each right there, if they are any good and have alternative employment opportunities.) Then you pay off your analyst(s), your programmers, and the cleaning lady. Then you pay off your partner(s) (don't tell me you are going at this alone, that is a bad idea.) By the time you are done, if you are lucky, your take home is low six figures. If you are that good, that is peanuts compared to what a money management firm would pay you for the same performance. Sure, its your own gig, but you'd have to keep it up for 3-5 years before you really were to make it worth your while. It takes a lot of stamina and ability (and luck) to get there.
Cheers,
Yabai
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