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pb273
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Posts: 670
Joined: July 14th, 2002, 3:00 am

Which Prime Broker for a Startup HF?

June 23rd, 2009, 11:59 pm

I am interesting in opening my own HF. Having seen the seeding business from close angles, I know that it is impossible for me to raise seed capital and the only way to go forward is to use my own capital (and I don't have any rich friends or relatives either). Since, I am planning to use my own capital, I can't of course afford Goldman Sachs as a Prime Broker or McGradley & Pullen as an Auditor, etc. I am also still early stage of planning and can be a year or more away from making a step forward.Is there anyone on this forum who had the experience of starting their own hedge fund? If so, can they share experiences about using a cheaper Prime Broker, cheaper Auditor, cheaper Administrator, etc ... who are the cheap guys out there and whom do you recommend and why? any real experiences will be great ...
 
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gardener3
Posts: 1496
Joined: April 5th, 2004, 3:25 pm

Which Prime Broker for a Startup HF?

June 24th, 2009, 1:31 am

It depends on how much capital you have and what instruments you plan to trade. Take a look here: http://www.nptradingpartners.com/
 
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PaperCut
Posts: 1616
Joined: May 14th, 2004, 6:45 pm

Which Prime Broker for a Startup HF?

June 24th, 2009, 2:46 am

The way you posed this seems to imply that you need a huge amount of capital in order to form a PB relationship with a big firm. Quite the opposite. They typically enjoy taking on small, newly capitalized outfits.
 
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pb273
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Posts: 670
Joined: July 14th, 2002, 3:00 am

Which Prime Broker for a Startup HF?

June 24th, 2009, 3:41 am

QuoteOriginally posted by: PaperCutThe way you posed this seems to imply that you need a huge amount of capital in order to form a PB relationship with a big firm. Quite the opposite. They typically enjoy taking on small, newly capitalized outfits.Strange. That's a bit different from my experience. I had dealt with both Citi and GS as a part of my current job last year. Even before the crisis of Q3-Q4 in 2008, both had been quite reluctant to take small clients and have been actively trying to get rid of smaller clients. Last I had interacted, post the crisis, the fees etc for smaller outfits were substantially increased compared to larger outfits.
Last edited by pb273 on June 23rd, 2009, 10:00 pm, edited 1 time in total.
 
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daveangel
Posts: 17031
Joined: October 20th, 2003, 4:05 pm

Which Prime Broker for a Startup HF?

June 24th, 2009, 6:03 am

try NewEdge - i think its merger of Soc Gen and some other outfit.
knowledge comes, wisdom lingers
 
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Marine
Posts: 395
Joined: July 17th, 2003, 7:56 am

Which Prime Broker for a Startup HF?

June 24th, 2009, 6:30 am

Interactive Brokers is pretty good.
 
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PaperCut
Posts: 1616
Joined: May 14th, 2004, 6:45 pm

Which Prime Broker for a Startup HF?

June 24th, 2009, 12:34 pm

QuoteOriginally posted by: pb273QuoteOriginally posted by: PaperCutThe way you posed this seems to imply that you need a huge amount of capital in order to form a PB relationship with a big firm. Quite the opposite. They typically enjoy taking on small, newly capitalized outfits.Strange. That's a bit different from my experience. I had dealt with both Citi and GS as a part of my current job last year. Even before the crisis of Q3-Q4 in 2008, both had been quite reluctant to take small clients and have been actively trying to get rid of smaller clients. Last I had interacted, post the crisis, the fees etc for smaller outfits were substantially increased compared to larger outfits.Well I guess the world has changed. My experience was back in 01-04, when liquidity was, well, liquid. It was a beautiful world, back in those days.
 
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Fermion
Posts: 4486
Joined: November 14th, 2002, 8:50 pm

Which Prime Broker for a Startup HF?

June 24th, 2009, 8:28 pm

In my limited experience, a big hurdle for small outfits is the minimum capital required for portfolio margining. (Typically $500K - $5M, depending on broker.) Separate margining on individual trades, however much they are mutually hedging, can seriously limit your leverage.When I looked into this, it seemed to be the critical factor.
 
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pb273
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Posts: 670
Joined: July 14th, 2002, 3:00 am

Which Prime Broker for a Startup HF?

June 24th, 2009, 8:56 pm

QuoteOriginally posted by: FermionIn my limited experience, a big hurdle for small outfits is the minimum capital required for portfolio margining. (Typically $500K - $5M, depending on broker.) Separate margining on individual trades, however much they are mutually hedging, can seriously limit your leverage.When I looked into this, it seemed to be the critical factor.with a high likelihood it is going to be less than $5m. but i am not planning a very levered outfit, although the availability of shorts via the prime broker is a big concern to me.gardener3, marine, thanks for the links. I wasn't even aware IB provided PB services, I had always clicked on the individuals section before. saratoga prime is another outfit i have given a thought to.daveangel: newedge is a large PB, often considered on par with some of the bigger PB firms.
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