The Business of Running a Hedge Fund

I recently came across the attached white paper* from Merlin Securities which highlights, in part, the distinction between managing money and running a hedge fund business. This is an concept that I have been emphasizing whenever someone asks me about forming a new hedge fund. There are numerous examples of talented money managers that attempted to go their own way and ended up closing their shops. They failed, not because they didn’t know how to make money for their investors, but because of operational collapses. The challenges in building a sustainable hedge fund business and raising external assets cannot be overstated. This may be a bigger issue for individuals leaving investment banks or mutual funds than prior hedge funds. Given the financial rewards achievable by successful hedge fund managers, the better a foundation you build, the greater the chances for success for your investors and yourself. Starting with the right team (both internal and external) is just as important as partnering with quality investors.

Please feel free to add your thoughts to the discussion.

*Reprinted with permission from Merlin Securities.

George Roeck, Chief Operating and Financial Officer, Charter Bridge Capital Management, L.P.

Executive Board Member, HFBOA