Creating a Hedge Fund

Creating a Hedge Fund

A lot of people, especially those who work within the financial sector, have aspirations for one day starting up and running their own hedge fund. The only thing is, though, not everyone is meant to be able to run a hedge fund. It takes a special kind of person to properly run and manage a hedge fund to ensure that it is profitable and doesn’t end up losing money for its investors. While the initial startup costs are only about $15,000, there are several other things you need to consider before you create a hedge fund.

Creating a Hedge FundIn addition to having an amount of money that most people don’t possess right of hand, there are several other things involved with creating a hedge fund that separate those that are capable from those that are not. Perhaps the biggest obstacle to overcome is for potential hedge fund managers to realize that this type of fund is not like the type of fund they are normally used to seeing, which is a mutual fund. With a mutual fund, anyone and everyone can choose to invest in it, while hedge funds are more limited in who can invest. Mutual funds are also much more limited in what methods they can use to make money, while hedge funds are not hindered by these limitations, which are strictly enforced by the SEC.

In addition to having the initial startup costs taken care of, there is also a lot of other planning and work that needs to be done before you can actually get started in creating a hedge fund. The next most important step is consult will a qualified legal team of attorneys to lay out all of the details about your proposed fund to make sure it meets all the rules and regulations it needs to meet. Usually during this legal consultation, other issues will be brought up that will also need to be addressed. These legal teams expertise is focused on the hedge fund industry and is far different than other legal focus like criminal defense lawyer Sacramento who focused on other local legal issues.

Once you have all of the legal stuff squared away, then you can move onto finding a prime broker or prime brokerage firm to work with. This is a very important step when creating a hedge fund, as it will introduce you to not only the broker that you will be working with, but it will also show you their how their capital introduction services work. Oh yes, let’s not forget the PPM otherwise known as the private placements. Once you finish that, you will have to decide if you are going to work from home or have an office space setup. Most hedge fund managers can work from home, but some may work better in an office environment, so this is really just a personal preference.