Launching a Hedge Fund: Six Considerations for a Hedge Fund Startup
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Launching a Hedge Fund: Six Considerations for a Hedge Fund Startup

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Launching a Hedge Fund: Six Considerations for a Hedge Fund Startup Launching a Hedge Fund: Six Considerations for a Hedge Fund Startup Presentation Transcript

  • Considerations for Launching a Hedge Fund
  • Hedge Fund Launch Process
    Launching a hedge fund can usually take an average of six months and requires an extensive amount of planning and preparation
  • Six Considerations for Your Launch
    A hedge fund launch is a major undertaking that requires a methodical approach with experienced partners in various industries.
    Fund Development
    Marketing
    Infrastructure
    Telecommunications
    Data Protection
    Archiving
  • 1. Fund Development
    Hire legal council to create your legal structure
    Draw up essential documentation and tax planning
    Will you be an LP or LLC?
    Develop your business plan
    Create documented policies for compliance, valuation, and training
    Evaluate needs for order management, accounting, and risk management
    Attract talent
    Hire a chief operating officer (COO) responsible for trading operations, investor relations, legal accounting, finance, and IT
    Hire/outsource payroll and benefits duties
  • 1. Fund Development (cont.)
    Work with a prime broker
    Provides financing (margin lending, derivatives trading, and security lending) and value added services (capital introduction, business consulting, talent identification, and human resource consulting)
    Determine the fund’s location
    Domestic, offshore or both?
    Popular areas such as the Cayman Islands, the British Virgin Islands, Ireland and Bermuda each have different tax requirements and business costs
  • 2. Create Your Marketing Plan
    Create and regularly update marketing materials for investors and legal advisors
    Managers are advised to register with the SEC
    Have the principal of the fund, of which he is a general partner, sell securities (no commission)
    Hire a third-party marketer or broker dealer to sell securities (commission)
    Most controversial method is to use the Cash Solicitation Rule (Rule 206(4)3)
  • 3. Establish Your Infrastructure
    Create a reliable and secure technology infrastructure for 24x7 protection and support with the following essentials:
    A business continuity plan (BCP) and corresponding disaster recovery (DR) system
    A voice communications system
    Email and instant message archiving
    Create a multi-tiered approach to security
    Physical
    Data security
    24x7 monitoring
    Cameras
  • 4. Select Telecommunications Providers
    Determine Your Internet and Phone Connectivity
    Use two services and a router in case one goes down and look for a partner that offers proactive monitoring and security features to achieve near 24x7 availability
    Create an easy-to-use phone service
    Use a phone switch or PBX for routing calls, voicemails, and offers caller ID, auto attendant and integration with ring-down lines to various brokers
    Select your market data provider (examples include: Bloomberg, Thomson Reuters and Dow Jones)
    Selecting a vendor is based on the market and product coverage, as well as cost, speed, reliability and client service
  • 5. Finalize Data Protection
    Create your Business Continuity Plan (BCP) and Disaster Recovery (DR) guidelines – can take 2-3 months
    Determine the following:
    What are the mission-critical processes?
    Who are the key personnel?
    How are they going to be notified of an emergency?
    Where / how will they continue to operate?
    How often should I test my DR plan? (2-3 times per year)
    Host the DR site in a different geography to protect against local outages
    Conduct daily offsite backups of essential documents in an electronic format
  • 6. Create Your Archiving Approach
    The Federal Rules of Civil Procedure relating to Electronically Stored Information requires you to supply data on request:
    Email, Instant Messaging (IM), Bloomberg Mail/IM
    Documents, spreadsheets and PDFs
    Adhere to legal time requirements for email and IM data archiving
    Avoid data changes/deletions using WORM (Write Once Read Many) format
    Index data into searchable files so only requested information is provided
    House data on its own offsite server accessible via the website
  • Online Resources
    Visit Eze Castle Integration’s Online Knowledge Center at
    http://www.eci.com/knowledge-center/index.html.
    For more information, please visit Eze Castle Integration online at http://www.eci.com.
    Follow Eze Castle Integration on Twitter at: http://www.twitter.com/ezecastleECI.
  • One Federal Street, 9th Floor Boston, MA 02110 Tel: 617.217.3000 www.eci.com