Statement questions

Okay, so I decided to start a thread with some questions I am curious about. Just for giggles. I got to wondering some things, and decided to see what people in here thought, as far as how one could, in theory, practically solve these problems. Like a problem solving game, or a puzzle game. I am wondering if we have any attorneys out there specializing in this field that also understand trading entities and such.

Let me just explain one thing about structure, as I understand it. (Note that I am not an attorney, and everything in this thread is just my best understanding of all this at this time.) Anyone can form an LP and also their own corporate GP, or use an established GP for their LP ‘hedge fund’ (there are other structures, this one is perhaps the most common for small funds). There are many, many single person hedge funds out there, or two man operations, called ‘hedgies’. It’s standard practice for a hedge fund trader/manager to be invested in the fund they trade. I knew a guy once who ran a small fund and traded his, his dad’s, his neighbor’s, and his dentist’s capital. It’s a great way to pool all that money and legally trade it.

This is just some background so those that aren’t too familiar with this can follow along. I will say that traders usually don’t have a lot to do with the management of the corporate aspects, per se, as they have compliance officers, managers, and such for that, unless it’s a one man fund. Many times a two man fund has a trader and someone who ‘does all the rest’.

I know I never learn, but I am going to try very hard to keep this thread on topic, and have it not get highjacked. I only want specific answers to the exact questions below, nothing else. If anyone asks any questions or makes any comments not specifically addressing these questions, as the moderator of this thread I will edit them to say ‘This is not on topic, please start a separate thread for that topic’. Please do not reply to a post marked this way. Let’s only address the specific questions below.

I am curious as to how one would overcome the issue of posting statements when the trading is done via a hedge fund structure. Here are some issues (I’m sure there are more, so feel free to address those):

• The trades are executed for the LP, so all share owners have a part of them. Releasing any of that publicly, especially without permission of the GP ‘board’, would violate more rules/laws/privacy issues than I could count.

• The corporate GP ‘board of directors’ says, basically, ‘Are you kidding me, release statements to a public venue, with parts masked out (or worse, parts not masked out), for what reason?’

• The trading model for the fund is proprietary. Releasing trade sequences publicly, especially a long series of them, with time stamps, entry and exit prices, etc. is completely nixed by the ‘board’.

• Releasing a front page monthly statement only showing starting and ending balances, with the name of the fund and all other information blotted out reveals publicly details about the fund’s balance. Some funds want to do that, some don’t. And if the fund is unnamed, how is this of any value to anyone? The ‘board’ nixes this regardless.

• Hedge funds are highly regulated as far as advertising and solicitation. The SEC requires form D to be sent to them 15 days in advance of an advertisement, and copies of the ad to determine if it is accurate. Regulators would be asking what is the purpose of this public release if it is not in some way to solicit or advertise. If they thought it was an advertisement and the above wasn’t done, watch out. Trying to do an advertisement with the company name blotted out, well, imagine their response to that. With it showing, see above and below. If a fund doesn’t advertise and they meet the private fund advisor exemption, they don’t have to register/interact with the SEC (this is oversimplified, but you get the gist). Many hedge funds like to keep things as simple as possible, as far as regulators.

• How would a trader for a fund convince a compliance department and the ‘board’ that this is a good idea, when their immediate response is a mix of belly laughter and ‘Time to cut this trader loose’?


Anyway, I’m curious about this topic, and wondered if anyone had any realistic solutions to the above issues? If I find more issues I will post them. I should also post this to a hedge fund forum.

Really? No one has any solutions to any of these issues? You don't have to be an attorney to respond, if you think you know any solutions you can post them. Unfortunately, I don't think there are solutions to these problems. That's too bad, because I think the vast majority of professional traders trade in an entity structure, many times like this. I actually don't know any professional traders off the top of my head trading in a personal account. But, maybe it's a fairly moot question because I don't think most professional traders would have much interest in posting statements in a forum anyway...