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hedgefunds
- Thread starter soler
- Start date
Creating a hedge fund involves two principal steps. Step one is administrative. That is, forming the entities and drafting admission documentation (e.g., a private offering memorandum, agreement for admission, operating/partnership agreement, subscription procedetc.).
Step two is raising the capital to implement the fund's trading/investment strategy.
There are a few consulting firms, such as mine, that specialize in helping you with step 1. I have heard of firms that claim they will help you raise capital (i.e., step 2) but I have never heard of anyone actually getting capital from such firms.
My contact information is on ET. Let me know if would like to chat or talk more about this process.
Roger.
Step two is raising the capital to implement the fund's trading/investment strategy.
There are a few consulting firms, such as mine, that specialize in helping you with step 1. I have heard of firms that claim they will help you raise capital (i.e., step 2) but I have never heard of anyone actually getting capital from such firms.
My contact information is on ET. Let me know if would like to chat or talk more about this process.
Roger.
US hedge funds usually have two operations - one onshore in form of a limited partnership (often a deleware one) and an offshore entity on Bermudas, Bahamas, Cayman Island or British Virgin Islands.
the offshore structure usually has a trading manager, an administrator and an auditor.
I set up some funds of that kind so far. it is not as difficult as it sounds. And its is not too expensive, if you avoid the big names.
In order to raise capital you could either contact fund of hedge funds, of which some are willing to give money to emerging funds in order to form closer relationships. there are a number of big banks, including all major investment banks, that cold be interested in setting up a test account with you if the story is convincing. Do not be afraid of these big houses - they all are permanently looking for good investment opportunities.
I would propose that you search the web for all information you can get on the hedge fund industry and create a picture in your mind about that kind of business. Thats the most important step. To get a feel for the thing. Than try to get in touch with some smaller fund of funds since they will be more interested in you as a start up. But be carefull not to jump on the first train coming in - it is most probable not the right one.
Prepare yourself for this step. it is liek trading - the start ain't easy but it is manageable.
peace
the offshore structure usually has a trading manager, an administrator and an auditor.
I set up some funds of that kind so far. it is not as difficult as it sounds. And its is not too expensive, if you avoid the big names.
In order to raise capital you could either contact fund of hedge funds, of which some are willing to give money to emerging funds in order to form closer relationships. there are a number of big banks, including all major investment banks, that cold be interested in setting up a test account with you if the story is convincing. Do not be afraid of these big houses - they all are permanently looking for good investment opportunities.
I would propose that you search the web for all information you can get on the hedge fund industry and create a picture in your mind about that kind of business. Thats the most important step. To get a feel for the thing. Than try to get in touch with some smaller fund of funds since they will be more interested in you as a start up. But be carefull not to jump on the first train coming in - it is most probable not the right one.
Prepare yourself for this step. it is liek trading - the start ain't easy but it is manageable.
peace
Man makes some good points. However, he is incorrect in stating that most US hedge funds have an offshore operation. Most US hedge funds are managed by a US based entity (e.g., a corporation or LLC) which is owned by the person starting the fund. Also, as compared to US operations, offshore operations are very expensive to establish and maintain.
Offshore operations (fund administrators, etc.) are only required by offshore funds. Offshore funds are used to avoid US taxation of offshore fund investors. US fund investors cannot avoid US taxation no matter where they invest.
Offshore operations (fund administrators, etc.) are only required by offshore funds. Offshore funds are used to avoid US taxation of offshore fund investors. US fund investors cannot avoid US taxation no matter where they invest.
Invoco,
i always invested only in offshore entities, since entering a private limited partnership is very risky from a legal perspective - thus my view might be distorted towards offshores. i still think that most funds in excess of USDm 50 under management run an offshore vehicle.
and do not forget: it might be easy for someone with huge money to find people (friends?) willing to place money with him in form of a partnership, but a small start up operation will hardly find an investor who is willing to take much legal risk on top of performance risk.
i would no propose a lp structure to a small operation, but i know people who are just offering to manage accounts for investors. this is by definition the cheapest way to get into this since it does not require any setup at all.
peace
i always invested only in offshore entities, since entering a private limited partnership is very risky from a legal perspective - thus my view might be distorted towards offshores. i still think that most funds in excess of USDm 50 under management run an offshore vehicle.
and do not forget: it might be easy for someone with huge money to find people (friends?) willing to place money with him in form of a partnership, but a small start up operation will hardly find an investor who is willing to take much legal risk on top of performance risk.
i would no propose a lp structure to a small operation, but i know people who are just offering to manage accounts for investors. this is by definition the cheapest way to get into this since it does not require any setup at all.
peace
Man,
As an attorney, I am not sure what "legal risk" you are referring with respect to a partnership. There is no greater legal risk to a US investor in a US partnership than in an offshore partnership.
I have worked with hundreds of hedge funds as general counsel to a publicly traded brokerage firm as well as in private practice. Some of the larger US funds had offshore operations but this is not typical.
The goal of a start up hedge fund (with an new manager) is to get off the ground with the best structure available at the least expense. For US hedge funds this is either a limited partnership or LLC structure.
Managment of individual accounts is problematic because all states have limitations on the number of accounts that can be managed without the manager becoming registered as an investment adviser. Further, state and federal laws limit the ability of an investment adviser to receive a portion of the trading profits.
As an attorney, I am not sure what "legal risk" you are referring with respect to a partnership. There is no greater legal risk to a US investor in a US partnership than in an offshore partnership.
I have worked with hundreds of hedge funds as general counsel to a publicly traded brokerage firm as well as in private practice. Some of the larger US funds had offshore operations but this is not typical.
The goal of a start up hedge fund (with an new manager) is to get off the ground with the best structure available at the least expense. For US hedge funds this is either a limited partnership or LLC structure.
Managment of individual accounts is problematic because all states have limitations on the number of accounts that can be managed without the manager becoming registered as an investment adviser. Further, state and federal laws limit the ability of an investment adviser to receive a portion of the trading profits.
Quote from Invoco:
Man,
As an attorney, I am not sure what "legal risk" you are referring with respect to a partnership. There is no greater legal risk to a US investor in a US partnership than in an offshore partnership.
I have worked with hundreds of hedge funds as general counsel to a publicly traded brokerage firm as well as in private practice. Some of the larger US funds had offshore operations but this is not typical.
The goal of a start up hedge fund (with an new manager) is to get off the ground with the best structure available at the least expense. For US hedge funds this is either a limited partnership or LLC structure.
Managment of individual accounts is problematic because all states have limitations on the number of accounts that can be managed without the manager becoming registered as an investment adviser. Further, state and federal laws limit the ability of an investment adviser to receive a portion of the trading profits.
very good points. i was surprised to read "mans" comments concerning off shore entities. do you have a flat fee to set up the hedgefund or do you charge by the hour ??
best,
surfer
I am not a US citizen and it will be as you say with taxation on managed accounts.
Of course you need to be authorised as a registered trader, but that it is not too much of a burden IMO.
I wonder if you are claiming that it is not risikier to enter private partnership than to invest in a company by buying its stock, which is what takes place in most offshore hedge funds.
I still think it is not much easier to find people who join you (not just invest in you!) in such a partnership, which could have severe impact if derivatives were used and as far as I know partners will be liable for claims held against the partnership.
Anyways I do not intend to argue about this. If you think its a good thing for the person who started this thread to form a lp - fine.
peace
Of course you need to be authorised as a registered trader, but that it is not too much of a burden IMO.
I wonder if you are claiming that it is not risikier to enter private partnership than to invest in a company by buying its stock, which is what takes place in most offshore hedge funds.
I still think it is not much easier to find people who join you (not just invest in you!) in such a partnership, which could have severe impact if derivatives were used and as far as I know partners will be liable for claims held against the partnership.
Anyways I do not intend to argue about this. If you think its a good thing for the person who started this thread to form a lp - fine.
peace
marketsurfer
I do not set up funds professionally, I manage money for institutional investors and in course of that we had to start some funds.
I suggest you get different opinions in order to compare expenses. We always did things with big names, which are a pain if you are small. Maybe you can get hands on some Alternative Investment Magazine - you should find lists of administrators there. maybe some google search does it as well.
always be careful in choosing your partners - it might be crucial for potential investors that the structure is somehow okay. again, this does not mean you go to the big five, but its better not to take your brother in law as a fund administrator. always smells like trouble.
BTW if you send some material on your trading and your track record, I could have a look and maybe I know some people.
Anyways, i have absolutely no material interest in this thread. I just can imagine how you feel about setting up a fund and so. Another hint: be aware that it is work to make a money managing business run and ensure first that the trading operation will not suffer. in the end this is your product, not the legal entity, which might feel sexy for you in the beginning but is nothing worth in itself. Anybody can set up a fund. hardly nobody can trade successfully.
peace
I do not set up funds professionally, I manage money for institutional investors and in course of that we had to start some funds.
I suggest you get different opinions in order to compare expenses. We always did things with big names, which are a pain if you are small. Maybe you can get hands on some Alternative Investment Magazine - you should find lists of administrators there. maybe some google search does it as well.
always be careful in choosing your partners - it might be crucial for potential investors that the structure is somehow okay. again, this does not mean you go to the big five, but its better not to take your brother in law as a fund administrator. always smells like trouble.
BTW if you send some material on your trading and your track record, I could have a look and maybe I know some people.
Anyways, i have absolutely no material interest in this thread. I just can imagine how you feel about setting up a fund and so. Another hint: be aware that it is work to make a money managing business run and ensure first that the trading operation will not suffer. in the end this is your product, not the legal entity, which might feel sexy for you in the beginning but is nothing worth in itself. Anybody can set up a fund. hardly nobody can trade successfully.
peace