[BTC-TC] BTC Growth: Capital Growth via Hedge Fund-Style Investing

[tyrion70]

...you're making it very easy to run a Ponzi out of this...

...it's obvious you are missing a degree in people skills as far as I'm concerned.

...I asked you a polite question, and I find your answer far from it...

I appreciate the feedback.

You're welcome ;-)

I just updated my last post with a more concrete question. Can you take a look at that one?

Note on my feedback; I'm no native English speaker (Dutch) but I read your words as being very condescending. In Dutch if you refer to a third person like you did, it's considered quite offensive. I like to think that I'm quite good at English but I might have mistaken your answer there (if so please let me know).

Cheers,

[stripykitteh]

Note on my feedback; I'm no native English speaker (Dutch) but I read your words as being very condescending. In Dutch if you refer to a third person like you did, it's considered quite offensive. I like to think that I'm quite good at English but I might have mistaken your answer there (if so please let me know).

I am a native English speaker. I have interpreted Dr Greg's comments as being somewhat formal but not impolite, consistent with what you'd expect from someone running a hedge fund. I guess you'd call it "maintaining a professional distance". My impression is he does not want to appear to be on intimate terms with any of his investors for fear of appearing partial (we'd be disappointed to find out he'd been dispensing hot tips to certain favored individuals, for example).

My 2 cents.

[tyrion70]

Note on my feedback; I'm no native English speaker (Dutch) but I read your words as being very condescending. In Dutch if you refer to a third person like you did, it's considered quite offensive. I like to think that I'm quite good at English but I might have mistaken your answer there (if so please let me know).

I am a native English speaker. I have interpreted Dr Greg's comments as being somewhat formal but not impolite, consistent with what you'd expect from someone running a hedge fund. I guess you'd call it "maintaining a professional distance". My impression is he does not want to appear to be on intimate terms with any of his investors for fear of appearing partial (we'd be disappointed to find out he'd been dispensing hot tips to certain favored individuals, for example).

My 2 cents.

OK, I'll take your words for that then
@Greg, if that is the case, my well meant apologies for any harsh things I said. Never expected a language barrier in the English language

Back on topic; can you elaborate a little more on what you said regarding the reporting you have to do for English taxes and deposition of records?

Correct me if I'm wrong, but your Ltd qualifies for Abbreviated Accounts (I think they call it that?), which do not need to be audited. (There's a 3.26M GBP limit there I believe?). This means you only have to report a short balance sheet and turnover is not even required?

Will the bitcoin assets you now hold in name of the Ltd be reported as Assets in your balance sheet? Or do you follow the same reasoning there that as long as they haven't been converted to fiat they don't have to be reported?

Thanks in advance,

[DrGregMulhauser]

...I read your words as being very condescending. In Dutch if you refer to a third person like you did, it's considered quite offensive...

I intended specifically to refer to more than one person; I intend whatever I write here to be of use to whoever happens along to read it. If any potential participants feel they need individual private consultation, this is not the place for it.

...As a UK limited company you will have to keep proper records of your profits (management fees) because you have to pay taxes on that...I conclude that you have no obligation whatsoever to keep records of bitcoin denominated assets...

Your conclusion is not only erroneous, but grossly so. Basic accounting does not permit companies simply to whip up some profit statements out of thin air, unsupported by detailed records, including detailed records of assets, liabilities, and just about everything else.

...This means you only have to report a short balance sheet and turnover is not even required?

Again, your conclusion is not only erroneous, but grossly so. (Not to put too fine a point on it, but we're now descending into the absurd: how do you imagine a company would even begin to report taxable income by reporting only a balance sheet? It's a rhetorical question: I am not looking for a reply.)

More generally, I hope that you and any other interested readers will appreciate that this thread was opened before the fund launched, specifically with the intention of providing a venue for anyone with an interest to ask questions, make suggestions, and evaluate for themselves what was being proposed. (And it certainly was not opened to provide an ongoing opportunity for tutorials on basic accounting or UK law.) I put a great deal of time and effort both into the preparation of the original listing document and into the discussions which took place on this thread before the fund launched.

However, the fund has now launched. As you will hopefully appreciate, that means I now have one or two things that are occupying my time with regard to actually managing the fund -- an activity which I consider altogether more pressing than investing yet more of my time here on the forum, re-hashing the same questions which were already discussed before the fund launched.

Re-hashing the same types of questions represents a direct subtraction from the time that I can spend actually managing the fund: it is, in a very real sense, a direct drag on the returns of the fund. I understand that since you are looking to launch a fund of your own, it would naturally be in your interest to occupy my time as much as possible with extended discussions about basic accounting and even your accusations that I am "making it very easy to run a Ponzi out of this". But I hope you will appreciate that my willingness to engage in this exercise is severely limited, and in my eyes this exercise is directly contrary to the interests of those of us who are actually participating in the fund -- including me.

Maybe my reluctance to take time away from fund management for re-hashing or for discussing basic accounting sheds some light on why my first response to many questions is going to have to be "RTFM" or even just simply to remind potential participants of what it already says in the listing documents: if the information which I have already spent a great deal of my time providing is in any way insufficient for your needs, then do not participate.

[canth]

FWIW, I don't have a problem with this. Greg - go manage the fund, make us a profit and answer questions about fund performance once they come up. For those concerned about a ponzi, there's not enough at stake to risk jail time. As far as motivations go, I'd say that the 2% fees are also not worth Greg's time by themselves - Greg's clearly going after 20% of the gains. I'm fine with that, since that's why we're all here - looking for increased valuations.

[tyrion70]

Wow.. Wonder what stripykitteh makes of this..

Anyways, it is not my intention to take time away from your fund management at all, especially since I invest in your fund as well and wish all the best for your fund.

For some reason all my questions turn into conclusions and accusations once you quote them and the real questions remain unanswered to me so I'll just live with it

... I understand that since you are looking to launch a fund of your own, it would naturally be in your interest to occupy my time as much as possible with extended discussions about basic accounting and even your accusations that I am "making it very easy to run a Ponzi out of this".

It was and never will be my intention to do such a thing. Nothing I can say against it though, so I will stop "wasting" your precious time.

Lastly and for the record: I think you are running an honest fund here and I wish you all the best with it (and my btc ). This might come as a surprise but my questions all were meant to do good not harm.

All the best,

[stereotype]

Wow.. Wonder what stripykitteh makes of this..

Anyways, it is not my intention to take time away from your fund management at all, especially since I invest in your fund as well and wish all the best for your fund.

For some reason all my questions turn into conclusions and accusations once you quote them and the real questions remain unanswered to me so I'll just live with it

... I understand that since you are looking to launch a fund of your own, it would naturally be in your interest to occupy my time as much as possible with extended discussions about basic accounting and even your accusations that I am "making it very easy to run a Ponzi out of this".

It was and never will be my intention to do such a thing. Nothing I can say against it though, so I will stop "wasting" your precious time.

Lastly and for the record: I think you are running an honest fund here and I wish you all the best with it (and my btc ). This might come as a surprise but my questions all were meant to do good not harm.

All the best,

Nicely put, Sir.   

[xchrisxsays]

...I read your words as being very condescending. In Dutch if you refer to a third person like you did, it's considered quite offensive...

I intended specifically to refer to more than one person; I intend whatever I write here to be of use to whoever happens along to read it. If any potential participants feel they need individual private consultation, this is not the place for it.

...As a UK limited company you will have to keep proper records of your profits (management fees) because you have to pay taxes on that...I conclude that you have no obligation whatsoever to keep records of bitcoin denominated assets...

Your conclusion is not only erroneous, but grossly so. Basic accounting does not permit companies simply to whip up some profit statements out of thin air, unsupported by detailed records, including detailed records of assets, liabilities, and just about everything else.

...This means you only have to report a short balance sheet and turnover is not even required?

Again, your conclusion is not only erroneous, but grossly so. (Not to put too fine a point on it, but we're now descending into the absurd: how do you imagine a company would even begin to report taxable income by reporting only a balance sheet? It's a rhetorical question: I am not looking for a reply.)

More generally, I hope that you and any other interested readers will appreciate that this thread was opened before the fund launched, specifically with the intention of providing a venue for anyone with an interest to ask questions, make suggestions, and evaluate for themselves what was being proposed. (And it certainly was not opened to provide an ongoing opportunity for tutorials on basic accounting or UK law.) I put a great deal of time and effort both into the preparation of the original listing document and into the discussions which took place on this thread before the fund launched.

However, the fund has now launched. As you will hopefully appreciate, that means I now have one or two things that are occupying my time with regard to actually managing the fund -- an activity which I consider altogether more pressing than investing yet more of my time here on the forum, re-hashing the same questions which were already discussed before the fund launched.

Re-hashing the same types of questions represents a direct subtraction from the time that I can spend actually managing the fund: it is, in a very real sense, a direct drag on the returns of the fund. I understand that since you are looking to launch a fund of your own, it would naturally be in your interest to occupy my time as much as possible with extended discussions about basic accounting and even your accusations that I am "making it very easy to run a Ponzi out of this". But I hope you will appreciate that my willingness to engage in this exercise is severely limited, and in my eyes this exercise is directly contrary to the interests of those of us who are actually participating in the fund -- including me.

Maybe my reluctance to take time away from fund management for re-hashing or for discussing basic accounting sheds some light on why my first response to many questions is going to have to be "RTFM" or even just simply to remind potential participants of what it already says in the listing documents: if the information which I have already spent a great deal of my time providing is in any way insufficient for your needs, then do not participate.

SHOTS FIRED. Greg doesn't mess around, damn. Do your thing Greg, go forth and earn BTC!

[vandinn]

Wow.. Wonder what stripykitteh makes of this..

I think everyone made the same of this: Greg didn't answer your questions because he doesn't care - he got his funds for playing already. I agree with you that some kind of supervision of what's going on in the fund would boost the confidence of investors greatly (there are now people willing to sell at a loss). Dr. got his funds just because he was articulate and sophisticated - but he doesn't need to prove anything to anyone as long as people in Bitcoinland are willing to buy that (risk of not knowing anything). And they were.

I think I am very much on the same page with you. I actually also think the fund can have profits (as long as it focuses on (intra-)day trading rather than actual investments). Unlike you, however, due to this lack of knowledge of what's going on in the fund, I decided to stay away for now.

[canth]

Wow.. Wonder what stripykitteh makes of this..

I think everyone made the same of this: Greg didn't answer your questions because he doesn't care - he got his funds for playing already. I agree with you that some kind of supervision of what's going on in the fund would boost the confidence of investors greatly (there are now people willing to sell at a loss). Dr. got his funds just because he was articulate and sophisticated - but he doesn't need to prove anything to anyone as long as people in Bitcoinland are willing to buy that (risk of not knowing anything). And they were.

I think I am very much on the same page with you. I actually also think the fund can have profits (as long as it focuses on (intra-)day trading rather than actual investments). Unlike you, however, due to this lack of knowledge of what's going on in the fund, I decided to stay away for now.

You seem new to the idea of how hedge funds work - they don't disclose their holdings except when required by the SEC. I think you don't realize that you are exactly the kind of investor that Greg does not want - he doesn't want advice on how to trade or to be asked questions about what his holdings are.

We have invested in a fund that will be traded for profit. If there isn't any profit then it sucks to be us for the losses/opportunity cost and it sucks for Greg since he'll have wasted his time for little payback. I think that the wisest thing that you've done is to steer clear - this investment isn't for you, as it would seem many real world hedge funds aren't either.

[vandinn]

Wow.. Wonder what stripykitteh makes of this..

I think everyone made the same of this: Greg didn't answer your questions because he doesn't care - he got his funds for playing already. I agree with you that some kind of supervision of what's going on in the fund would boost the confidence of investors greatly (there are now people willing to sell at a loss). Dr. got his funds just because he was articulate and sophisticated - but he doesn't need to prove anything to anyone as long as people in Bitcoinland are willing to buy that (risk of not knowing anything). And they were.

I think I am very much on the same page with you. I actually also think the fund can have profits (as long as it focuses on (intra-)day trading rather than actual investments). Unlike you, however, due to this lack of knowledge of what's going on in the fund, I decided to stay away for now.

You seem new to the idea of how hedge funds work - they don't disclose their holdings except when required by the SEC. I think you don't realize that you are exactly the kind of investor that Greg does not want - he doesn't want advice on how to trade or to be asked questions about what his holdings are.

We have invested in a fund that will be traded for profit. If there isn't any profit then it sucks to be us for the losses/opportunity cost and it sucks for Greg since he'll have wasted his time for little payback. I think that the wisest thing that you've done is to steer clear - this investment isn't for you, as it would seem many real world hedge funds aren't either.

Haha, almost as if Greg was talking himself. What I am missing here is the SEC (or any variation of it). I won't comment on the derogatory part of your reply. You can keep that style of communication between Dr. and yourself.

[DrGregMulhauser]

...What I am missing here is the SEC (or any variation of it)...

As some participants might be aware, up until a certain threshold fund size, the SEC does not require that hedge funds disclose their holdings or their trading activity; thus, analogies based on whether the SEC or some variant is present or "missing" don't seem to bear directly on the question of disclosure for a fund of this size. (Some participants will also be aware of academic studies suggesting that funds which do not disclose their trading activities tend to outperform otherwise comparable funds which do.)

More to the point, however, there is a reason why the listing documents include a Not-So-FAQ: it was in hopes of making some of these questions not so frequently asked. The bottom line is simple: if potential participants lack confidence or want the fund to become something other than it is so that they can feel confident, then they should not participate.

[Ytterbium]

...What I am missing here is the SEC (or any variation of it)...

As some participants might be aware, up until a certain threshold fund size, the SEC does not require that hedge funds disclose their holdings or their trading activity; thus, analogies based on whether the SEC or some variant is present or "missing" don't seem to bear directly on the question of disclosure for a fund of this size.

The SEC also doesn't allow non-qualified investors to invest in Hedge Funds either.

[radiumsoup]

The SEC also doesn't allow non-qualified investors to invest in Hedge Funds either.

That's one of those "wink-wink" rules that the SEC puts in place to keep the good old boys' club intact... they claim it's to protect the retiree from losing it all in one swipe, but it's really about keeping the big money where the big money can watch over it.  The rules are written by the ones with the most to lose, after all.

[xaviarlol]

Am I missing something DrGregMulhauser, or is there no place to check the balance sheet for your fund?

Please advise.

[stripykitteh]

Am I missing something DrGregMulhauser, or is there no place to check the balance sheet for your fund?

Please advise.

Have a look at Greg's post from August 29.

[xaviarlol]

Am I missing something DrGregMulhauser, or is there no place to check the balance sheet for your fund?

Please advise.

Have a look at Greg's post from August 29.

performance, then?

[Progressive]

From the contract at BTCT:

Periodic Public Reporting on NAV

Approximately once per month, the fund's investments will be marked to market, and the issuer will publish the fund's Net Asset Value (NAV) and an overview of its current strategy and investment types. Net Asset Value will provide the basis for determining fund fees as well as providing subscription and redemption windows as described in the following section. The frequency of NAV reporting may be adjusted so as to occur more or less frequently, in accordance with participant interest; any decision to adjust the frequency of reporting will be announced publicly at least 7 days in advance.

In the case of individual equity options, for which a bona fide market does not exist, open positions will be valued using the best available data at the time -- for example applying the most recently available implied volatility for the nearest match offered in terms of strike price and expiry. Debt for which no secondary market exists will be discounted for any potential impairment as estimated by the fund manager. Investments in unlisted businesses will be valued on a case-by-case basis, with adjustments relative to original book prompted by changes such as significant changes in cashflow or new valuations implied by the unlisted business's subsequent funding rounds. The fund manager is well aware of the hazards implicit in attempting to value illiquid assets such as unlisted businesses, and therefore adjustments to original book will be made only where the case is compelling.

As a general rule, hedge funds do not disclose full trading histories, and they disclose snapshots of specific holdings only weeks or even months in arrears, if at all, so as to minimise the adverse impact on returns caused by publicizing their ongoing investment strategies. Participants who rely on portfolio snapshots to infer underlying investment strategies, or who otherwise require detailed updates on portfolio changes, should probably not invest in hedge funds in general and should not participate in a Bitcoin-denominated fund operating in a hedge fund style.

[Peter Lambert]

From the contract at BTCT:

Periodic Public Reporting on NAV

Approximately once per month, the fund's investments will be marked to market, and the issuer will publish the fund's Net Asset Value (NAV) and an overview of its current strategy and investment types. Net Asset Value will provide the basis for determining fund fees as well as providing subscription and redemption windows as described in the following section. The frequency of NAV reporting may be adjusted so as to occur more or less frequently, in accordance with participant interest; any decision to adjust the frequency of reporting will be announced publicly at least 7 days in advance.

In the case of individual equity options, for which a bona fide market does not exist, open positions will be valued using the best available data at the time -- for example applying the most recently available implied volatility for the nearest match offered in terms of strike price and expiry. Debt for which no secondary market exists will be discounted for any potential impairment as estimated by the fund manager. Investments in unlisted businesses will be valued on a case-by-case basis, with adjustments relative to original book prompted by changes such as significant changes in cashflow or new valuations implied by the unlisted business's subsequent funding rounds. The fund manager is well aware of the hazards implicit in attempting to value illiquid assets such as unlisted businesses, and therefore adjustments to original book will be made only where the case is compelling.

As a general rule, hedge funds do not disclose full trading histories, and they disclose snapshots of specific holdings only weeks or even months in arrears, if at all, so as to minimise the adverse impact on returns caused by publicizing their ongoing investment strategies. Participants who rely on portfolio snapshots to infer underlying investment strategies, or who otherwise require detailed updates on portfolio changes, should probably not invest in hedge funds in general and should not participate in a Bitcoin-denominated fund operating in a hedge fund style.

We have no idea what he is investing in, so there is no way to estimate if it is doing well or not. Only Greg knows how the fund is doing, and so he can use his insider knowledge to make trades advantageous to himself just before releasing the monthly report (which we just have to believe him is accurate). Then, whoever sees the report first will be at an advantage to buy or sell at the best rate before the market catches up.

In a couple months we may be able to look back at the reports and see the types of things he invests in, and how well he performs vs the overall market. Until then it is basically gambling?

[radiumsoup]

We have no idea what he is investing in, so there is no way to estimate if it is doing well or not. Only Greg knows how the fund is doing, and so he can use his insider knowledge to make trades advantageous to himself just before releasing the monthly report (which we just have to believe him is accurate). Then, whoever sees the report first will be at an advantage to buy or sell at the best rate before the market catches up.

In a couple months we may be able to look back at the reports and see the types of things he invests in, and how well he performs vs the overall market. Until then it is basically gambling?

Think of it this way: just 20BTC will get you a full 1% stake in the fund (at least until he decides to allow another round of funding, but that's supposed to happen at the then-current NPV, so no harm to early adopters.) If you want to be able to take a chance at the first, real, publicly available pseudo-hedge-fund for BTC that is (presumably) professionally managed, this is your security.

If you don't, then it's not.