Stage 0 Hedge Fund?

Strange · Post by **Strange** » Wed Dec 29, 2004 8:15 pm

If you had an offer to work for a hedge fund in it's start-up stage, would you take it? I literally mean that the fund has not really made any trades yet. How would you evaluate risk and reward going into a situation like this? What would you look at?

chiral3 · Post by **chiral3** » Wed Dec 29, 2004 8:39 pm

You would have to do a historical on the people there, in that money tends to money. The probabilities are too against success. However, if the guys starting it are prone to making money, money will follow. In terms of returns you may still fuck the investor, but you will still have your fees, and a worthless 20% of assets.

Martingale · Post by **Martingale** » Wed Dec 29, 2004 8:41 pm

I guess if the people there are good, and you believe in what they do, you can go for it..depends on your due diligence on the people/their strategy and also your risk preference.

quantie · Post by **quantie** » Wed Dec 29, 2004 9:24 pm

On the cons every once in a while you hear about hedge funds that don't taken off..something to keep in mind if you are dealing with strangers.

Oh well , [b]" Strangers are just friends waiting to happen. "[/b]

Baltazar · Post by **Baltazar** » Wed Dec 29, 2004 10:25 pm

and you may have a bigger/varrier role in an infant Hf than in an adult one, wich maybe of interest carrer and skill wise

JabairuStork · Post by **JabairuStork** » Fri Dec 31, 2004 3:27 pm

You look at it like you would any start-up venture.

How much confidence do you have in the product?

Do you think this place is set up to execute their strategy properly?

Do the people seem competent? Do they have any history of having done this before?

What are the immediate rewards for you?

What is the potential gain (discounted very heavily for uncertainty)?

If this fund goes belly up, where does that leave you?

jungle · Post by **jungle** » Fri Dec 31, 2004 7:22 pm

also depends what you would be doing for them...if you were head trader (or whatever) and the fund failed, clearly that would reflect badly on you...on the other hand, if you are the janitor (i'm using that as an extreme example, so no offense intended) then nobody will blame you if the fund fails. Big Smile

i think in general people in finance like the *idea* of risk taking, but when people take risks and it doesn't work out, oh dear...there is a lot of stigma attached to failure.

temnik · Post by **temnik** » Fri Dec 31, 2004 10:33 pm

[quote]
i think in general people in finance like the *idea* of risk taking, but when people take risks and it doesn't work out, oh dear...there is a lot of stigma attached to failure.
[/quote]

I think I've seen the opposite: most of the time people discount how bad you were, but pay attention to how [b]big[/b] you were. This applies even to such notorious cases as LTCM.

So, if you've got savings to live off for 1-2 years and some personal trust in the venture, and it's a leap forward career-wise - then jump right in!

apine · Post by **apine** » Sat Jan 01, 2005 2:24 am

it also depends on what you are leaving. it might the type of situation where you are trying to make a transition and this will provide a way for you to do it. for instance if you are trying to move from quant to trading (or vice versa).

i don't think that every "failure" is viewed negatively. as stated above it depends on what your role in the firm (and really the failure) was. it also depends on the external circumstances -- e.g., if all of the hedge funds in that sector blew apart and this firm outperformed but was forced to dissolve because the principals needed to start earning money.

on the other hand, there is much less cover to hide behind in a small firm. so if there are problems, it is hard to fluff off as pigeon-brained management floating up because of connections as one can at a bank.

JabairuStork · Post by **JabairuStork** » Sun Jan 02, 2005 6:26 pm

I have to agree with Temnik. It seems that if you fail in a big way, it can actually be more of a career booster.