How to Raise the Money to Launch Your Own Hedge Fund
It was the best of times, it was the worst of times in the hedge fund business. After last week’s announcement that the once multibillion dollar Eton Park hedge fund would be shutting down, the industry was left grasping for answers once again.
As Business Insider reports, hedge fund closures are now outpacing launches—and have so for the past two years. This has partly to do with the inability to raise money or keep it, along with increased government regulations.
So what exactly does it take to launch a hedge fund in 2017? Business Insider reached out to the world of hedge fund managers and consultants and polled them. Here are a few of the major takeaways:
Don’t Raise Capital Too Fast – Basically, don’t charge out of the gate like a raging bull, only to find yourself a mewling kitten a few years later. It’s all about pacing and not overshooting.
A Good Manager Is Worth His Weight in Gold – With the average amount of money needed to start a hedge fund in the $100 million range, per the article, investors should “expect managers to put up significant portions of their net worth into the fund.”
A Manager Is Only as Good as His Résumé – Besides that net worth, a hedge fund manager needs a evidence of a solid résumé in successful investing and at minimum, three years of service to show his investors he means business.
Patience Is a Virtue – One expert told Business Insider that hedge funds shouldn’t expect investor asset allocations to be a one-and-done type thing. Expect a grace period of potentially as long as six months to a year.
Play the Name Game – A recent study found that a hedge fund’s name could positively affect the amount of money it raised. How does “Real Clear Life Financials” sound to you?