1. Launching a Hedge Fund:
10 Keys to Success

2. Launching a Hedge Fund
There are a host of decisions hedge fund
managers need to make during the launch
process:
– Legal/Regulatory
– Marketing/Capital-Raising
– Technology
Lack of transparency no longer acceptable
– Competition for investments is high
Operational excellence is becoming top factor in
allocation decisions

3. #1 Do your legal homework.
As a first step, you’ll need to hash out some legal
considerations:
– Determine your structure and investment strategy.
– Determine what assets under management you will be
launching with. This number may affect your
strategy/structure.
• Are you seeking acceleration or seed capital?
– Are there regulatory requirements based on your
location/structure/AUM?
– Are there tax implications related to your fund launch?

4. # 2 Create a 24-month marketing plan.
Months 1-6:
– Ask yourself important questions (Who am I? What is my
edge?) .
– Determine your process for marketing.
– Create your marketing pitch (Write it down and learn it!).
– Invest in a CRM system so you can keep track of investor
communication.
Months 6-12:
– Contact early stage investors. Your success (or lack thereof)
will help you determine if you need to tweak your
marketing pitch.

5. # 2 Create a 24-month marketing plan.
Months 12-24:
– Implement a comprehensive marketing campaign.*
*This is where having a CRM in place will be beneficial. If
you’ve been able to track your previous contact with
investors, it will help you better tailor your messaging.

6. # 3 Surround yourself with service providers
whose strengths will offset your weaknesses.
Every successful hedge fund needs smart partners on
their side.
– Using best-in-class vendors and service providers says a lot to
investors about the value you place on your firm.
Select vendors and service providers you can grow
with.
If you outgrow your vendor, it can be a significant operational
disruption to transition to a new one.
From a technology perspective, investors want to see
that you’ve made an investment in systems and
processes that support your business & trading
operations.

7. #4 Develop an IT budget for your first 2-3 years.
Establish a budget for both your
infrastructure/hardware and software
requirements.
You will need to know:
– How many offices will you launch with?
How many users?
– Where are your offices located?
– What are your trading practices?
– What kinds of systems do you need for
daily operations? (Order Management
System, Portfolio Accounting, Risk
Management, CRM/IRM, etc.)

8. #4 Develop an IT budget for your first 2-3 years.
Ensure your technology budget coincides with your
growth plan. Do you expect to grow quickly? Open new
offices? Expand internationally? You will need to account
for these changes.

9. #5 Learn about Dodd-Frank and how it affects
your firm.
Hedge fund registration isn’t just checking a box anymore.
Represent your firm accurately and be descriptive of your
operations, otherwise you open your firm up to serious
regulatory and criminal prosecution.
Some managers, even if not legally mandated, are
choosing to register their funds because they think it will
be viewed positively by investors.
Make sure you understand the technology implications of
Dodd-Frank. Your firm will need system safeguards (data
protection & disaster recovery) and email archiving in
place.

10. #6 There are three steps to leaving a good
impression. Use them.
Explain your strategy clearly and concisely.
Explain how your firm is different.
– Is it your process? Your business? Structure?
– Once you figure it out, use it to your advantage.
Explain your risk management and corporate
governance procedures.
Ultimately, remember that your first impression is your best
impression. If you blow it on the first opportunity, you may not
get another one.

11. #7 Remember that when it comes to
technology, you have options.
Years ago, hedge funds had to invest in a lot of hardware;
some even had to build out expensive Comm. Rooms.
Nowadays, firms have options when it comes to their
technology infrastructure.
– With cloud computing (infrastructure-as-a-service), firms can
save on upfront capital expenditures by hosting their
infrastructure in the Cloud.
Cloud services offer more
flexibility than traditional
infrastructure models and can
create significant cost-savings for
firms of all sizes.

12. #8 Take the time to build a real business.
Firms often place too much emphasis on
managing portfolios and not enough on managing
the business as a whole.
Examine your firm from inside out. Invest in all
aspects of your business (investment, legal,
operations, technology, etc.) to create a firm that
investors will want to allocate to.

13. #9 Transparency is of critical importance.
Since the 2008 economic collapse and scandals
caused by the likes of Madoff, transparency has
become a key requirement for investors.
Fund managers are taking this to heart and
making efforts to comply with increasing investor
requirements.
Document everything.
Invest in risk management tools that will give
comfort to your investors.

14. #10 Remember that raising capital is a non-
stop process.
Marketing your hedge fund cannot just be a step in
your launch process. It must be a step in your
business process.
Competition for investors is at an all-time high.
Figure out what sets you apart. If you don’t learn how
to differentiate yourself, you will get lost in the
crowd.
Put time into the small things that will set you apart.
Write a thank-you note. It’s the small gestures (and
common sense!) that often puts firms ahead.

15. Contributors
The material put forth in this presentation is
attributed to:

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