Starting and Operating a Successful Hedge Fund
Whether you are a newly registered investment adviser or an investment manager with a strong track record, starting and operating a successful hedge fund begins with two things: proper legal structure and sound business practices.
The organization of the hedge fund structure typically includes establishing a variety of legal entities for the fund itself and various management entities. The particularity of the structure depends upon the size of the hedge fund.
In addition, you will need to ensure:
- The hedge fund is appropriately registered with the correct entities, such as the Securities and Exchange Commission and state securities divisions
- Your legal counsel creates the appropriate offering documents and governing documents for the hedge fund operation
- The appropriate bank and brokerage accounts are established with the appropriate tax reporting obligations
The above are just a few of the important items when it comes to starting and operating a successful hedge fund. Depending upon your fund’s operational structure, there may be additional requirements and ongoing compliance and regulatory needs.
But, the most important, and albeit, difficult aspect will be attracting investor capital. If you are an investment manager with a proven track record, this may be less difficult than a new investment manager.
Regardless of your track record, what is important is the way you implement your hedge fund structure. Raising significant investor capital (both from U.S. and non-U.S. investors) depends largely on the manager’s ability to:
- Understand their target market
- Build a specific investment strategy
- Implement the manager’s marketing strategy in an organized way
Nothing can derail the establishment and operation of a hedge fund as much as improper regulatory compliance. As part of hedge fund operation, your legal counsel should continually evaluate Registered Investment Adviser (RIA) licensing requirements and annual filing deadlines, appropriate SEC Form D Filings and State Blue Sky Filings, and the IRS tax compliance of your hedge fund.
If you have questions about starting and operating a hedge fund, or if you currently have a hedge fund and looking for legal counsel regarding its operation, please contact our office at (513) 241-0400. You can also fill out the contact form on our website and one of our attorneys will respond shortly.