Managing hedge funds continues to be a major source of income for some. Though these funds have a high rate of failure due to the challenging nature of the industry, successful managers are able to earn hundreds of millions or more. If you become a hedge fund manager you stand to prepare for your retirement with savings once beyond your wildest dreams. So how is this possible? How can successful business owners and investors leverage their current assets in order to make a run at overseeing a hedge fund? Here are a few tips:
Seek leverage early on. The most successful hedge fund managers are ones that had some kind of competitive advantage in the market. This could involve a private source of information, a valuable trading network, a family connection, or a previous inroad with an asset-management corporation.
Have a clear goal. Have a clearly defined investment strategy that your investors and partners will understand. Bank on ideas that have been thoroughly vetted in real markets. In others words, don’t start a hedge fund on a startup idea or entrepreneurial lark. Investors want meat and potatoes on their plate, not a picture of the stew you plan to make once you get the right ingredients.
Make sure you are well funded. Don’t be the Jerry Maguire of the hedge fund world—make sure you have reliable sources of capital right from the get-go. The amount of seed capital you will need depends on three factors: the size of your team and consultant pool; who your investment partners are; and the particular dimensions of your cost structure. Some hedge funds only need a few million, others may require a hundred million or more to start.
Seek additional assets. Using a combination of online outreach, professional logos, letterheads, business cards, and PowerPoint presentation (Business for Dummies-type stuff), actively seek out investors that can pad your assets. Your investor pool could include family and friends all the way up to corporations, foundations, endowments, and RIAs. Make sure people understand that you’re in this for the long run.
These are just a few tips for the wayward hedge fund manager. Other valuable suggestions include hiring solid legal counsel in order to ensure compliance and choosing the right prime brokerage firm to help you with your trades. Ultimately, you must look at the development of your hedge fund as a long term investment that could take years or even half a decade to get off the ground. You could start and failure several times. But if you play your cards right and amass the right team with the right financial portfolio and assets, the profits you could eventually reap are staggeringly high.