Starting a Hedge Fund
Tips on Starting a Hedge Fund (Part 2 of 2)
The post below is part of a 2 part series on starting a hedge fund. To read part 1 now please click here.
4. Focus on risk management and your investment process more than high performance returns. Yes, investors want to see strong returns but a top 5 sign of a green hedge fund manager is someone who constantly pushes their extremely high returns found within back-testing or their first 4 months of operating. Doing so ruins much chance of serious consideration as it gives off the impression that your fund will reach for those returns at any cost or risk. Speaking about returns too much takes away from confidence within your fund’s investment process and risk management controls.
5. Invest in yourself. Choose high quality service providers, build a team, break down your investment process into concrete steps, and spend 50 hours creating a solid PowerPoint presentation/pitch book for your fund and don’t show it to a single investor until you have completed 5 drafts of it. Too many times I see hedge funds looking to raise capital who have not yet taken the time to organize their own thoughts, plans or marketing materials. If your hedge fund is not worth your own investment of time, why should any invest their time and possibly capital into it? Investors look for signs of a manager having skin in the game in multiple ways.