Hedge Fund

Solomon Wealth Fund

I have been trading my own funds and a small number of clients’ funds full time since January 2007. I have decided to start a fund in 2012.

My annual average return over the period 1 January 2007 to 31 December 2009 was 108.78%. I do NOT intend to try for such large returns in my fund, and I outline the reasons below.

Starting a fund is for me, the next logical step, to manage other people’s money. In order to learn about fund management I started talking to the most successful people I could find in the industry. I have met with a number of very successful fund managers including one manager with over $20 billion under management and one with over $1.5 billion under management. Incidentally both started with nothing and one is a billionaire and the other is worth $400m.

My most interesting discovery is that investors do not want outsized returns! The fund with $1.5 billion under management has averaged a return of 12% per annum since inception! Believe it or not if you can consistently return 12 to 15% year after year with very low volatility, investors will flock to you.  

However it does take time. This fund started with nothing, finally after a few years managed to attract $10m of investor funds and three years later managed to double investor funds to $20m. Seven years later funds were at $1.5 billion. I heard similar stories from three different fund managers.

Needless to say a light went off in my head when I heard these stories! Investors would rather I consistently delivered 15% returns with very low volatility (and therefore very low risk) than 100% return with the huge volatility I have been trading with.

I have therefore decided to progressively lower the volatility and returns of the model I am using so that the fund is more attractive to investors. Fortunately making the model less volatile is fairly simple because I can simply reduce leverage and reduce the position sizing, while still taking the entry and exits signals generated by the model.

As well as starting the fund, I have also decided to allow investors to use managed accounts. This means that an investor can keep their money in their own account and I am simply given the ability to enter and exit trades on their behalf. In the current climate with frauds and scandals in the news, this gives investors full confidence because the funds are always in their name and under their control.

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