Helpful, Accessible Guidance for Budding Hedge Funds So You Want to Start a Hedge Fund provides critical lessons and thoughtful insights to those trying to decipher the industry, as well as those seeking to invest in the next generation of high performers. This book foregoes the sensational, headline-grabbing stories about the few billionaire hedge fund managers to reach the top of the field. Instead, it focuses on the much more common travails of start-ups and small investment firms. The successes and failures of a talented group of competitive managers all highly educated and well trained show what it takes for managers and allocators to succeed. These accounts include lessons on funding, team development, strategy, performance, and allocation. The hedge fund industry is concentrated in the largest funds, and the big funds are getting bigger. In time, some of these funds will not survive their founders and large sums will get reallocated to a broader selection of different managers. This practical guide outlines the allocation process for fledgling funds, and demonstrates how allocators can avoid pitfalls in their investments. So You Want to Start a Hedge Fund also shows how to: * Develop a sound strategy and raise the money you need * Gain a real-world perspective about how allocators think and act * Structure your team and investment process for success * Recognize the patterns of successful start-ups The industry is approaching a significant crossroads. Aggregate growth is slowing and competition is shifting away from industry-wide growth, at the expense of traditional asset classes, to market share capture within the industry. So You Want to Start a Hedge Fund provides guidance for the little funds the potential future leaders of the industry.Foreword xi Acknowledgments xv Introduction xix 1 The Lessons 1 Lessons for Managers 2 Lessons for Allocators 4 2 So You Want to Start a Hedge Fund? 7 3 Attracting Capital 11 Signals of Success 12 A Classic Chicken-and-Egg Problem 30 Investment Funds are Sold, Not Bought (Just Don t Tell the Buyers) 43 Leveraging the Buzz 49 Riding the Wave 55 Building a Great Business 60 4 Team 65 Your Single Best Investment 66 The Best a Man Can Get 73 The Two-Headed Portfolio Manager Monster 76 Where Do Nice Guys Finish? 83 Turnover: Don t Knock It Till You Try It 86 Pacing Growth 91 5 Investment Strategy 97 Finding True North 97 Best Foot Forward, With Both Feet 100 The Tug of War between Flexibility and Style Drift 106 Stick to Your Knitting 117 Building Blocks of Process 123 6 Investment Performance 129 A Slave to Monthly Numbers 130 Sustaining Performance 134 Reaching for Return 138 The Role of Luck 144 The Best Month in a Manager s Career 150 7 So You Want to Invest in a Start-Up Hedge Fund? 153 Influencing Outcomes 154 Terms 158 Preparing for Bumps in the Road 164 Heed the Stop Sign 167 Crossing the Velvet Rope 173 Making Decisions 177 8 Parting Thoughts 183 Author s Disclaimer 189 About the Author 193 Notes 197 Index 205