July 14, 2011 Leave a comment
The process of morphing an investment strategy into a hedge fund has increasingly become an arduous and expensive process. Hiring external consultants that specialize in establishing funds was once a luxury; now, many would say it is necessary. The idea of a prospective fund manager launching their fund themselves equates to one with no construction experience physically building a house. Not only are there profound structural issues to consider, but many nuances of the fund’s infrastructure act as imperative marketing pieces to attract new investments after launch.
Hedge fund consultants provide not only their own prowess in the industry, but also the experiences, successes, and failures of their past clients. The amount of information one can obtain after engaging a reputable consultant can be exponential. Some key areas veteran advisers cover include:
- Spearheading the launch process — saving you time and capital
Many professionals that enter the hedge fund space already have a few critical elements arranged – an investment strategy they have experience with; friends, family, business colleagues, or other early stage investors; and potential partners to assist in the management of the fund. Without the helpful guidance of veteran industry consultants, prospective managers are left with the daunting task of performing due diligence on service providers, negotiating several proposals, and satisfying their licensing and registration requirements in a timely and cost efficient fashion. A profitable endeavor quickly turns into a costly and time consuming process as managers try to traverse these uncharted waters themselves. Budgets are quickly liquidated and the result is funding spent on deliverables that get the fund manager no closer to launch.
- Providing reputation and transparency — third-party, independent service providers
A hedge fund’s service providers – legal counsel, administrator, auditor, and prime broker – are arguably the first aspects a potential investor reviews when performing due diligence on a prospective fund. When a fund manager markets their fund outside their familiar network of friends, family, and business colleagues, hiring reputable and transparent service providers is an absolute necessity. The providers speak volumes to the integrity of the fund. The result is that the investor feels protected from fraud and is assured that their hard earned monies is being placed in a vehicle with a solid and solvent foundation.
Seasoned advisers have their rolodexes filled with credible providers since their own reputation is placed on the line with each fund they assist in establishing. If providers end up not playing ball, respected consultants can call foul and have issues resolved. A fund manager launching a single fund on the other hand has little leverage, if any, unless their prospective fund has a weighty AuM. Additionally, consultants can negotiate proposals down to fit within the fund manager’s budget without sacrificing the quality of promised services.
- Marketability and value — direct experience in the industry
Advisers have the valuable ability to have a pulse on their respective industry, especially if they are leaders and perform a high quantity of work with quality clients. When consultants possess these traits, it is invaluable as they become pragmatic soundboards. An adviser’s natural state of work is to lead their client to their goals, both immediate and long-term. As such, guidance is given with their client’s best interests in mind since business relationships can reap rewards long after the fund is live. Unlike many attorneys that bill on an hourly basis, esteemed consultants lend a hand on matters hoping to continually become an integral part of the manager’s endeavors.
Although the fund’s success ultimately lies in the hands of the fund manager, consultants tend to do everything in their power to lead clients in the most beneficial direction given their unique circumstances. This includes constructing the fund with a focus on marketability and profitability – the longer the fund grows, the fund launch is deemed a success and the success of the fund manager is a direct benefit to his external consultancy team.
- Continual consultation — partners for the life of the fund
The due diligence process to obtain a qualified, independent adviser to assist with the fund launch can be a challenging endeavor on its own. Many of the guidelines in obtaining a practiced consultant include their competency in providing clear, detailed, and pragmatic answers during the interview process. The last thing you want is to hire an advisor that will constantly “over promise and under deliver” and bring up issues acting as reasoning behind their lack of delivery. Remember – it is most advantageous to find one that can not only assist with the initial establishment of your fund, but to be a resource for the life of the fund and ultimately, for the time frame you are in the industry.
Trevor L. Zeh has connected and collaborated with 100+ managers to establish hedge funds; CPOs/CTAs; Forex funds; futures funds; incubator funds; offshore funds; private equity funds; real estate funds; venture capital funds; registered investment advisors; Bitcoin funds; and cannabis funds.
His consultation is focused on providing the reputable and transparent infrastructure necessary to attracting and marketing to investors. Mr. Zeh has strategic partnerships with the world’s leading alternative investment service providers and professionals including hedge fund and private equity fund attorneys, auditors, administrators, prime brokers, and marketers.
Mr. Zeh works with emerging managers to bring their fund to fruition. His launch processes are efficient, dependable, and tailored to your specific needs.
You can contact Mr. Zeh at 1-631-252-5702 for a free consultation.