I'm certainly not the kind of hedge fund that WSJ talks about... at least not yet. But I've been around the startup/venture capital industry all of my professional life, so I don't see any of these challenges as being insurmountable. If you go down the list of top service provider from Alpha magazine... I personally spoke to 2-3 from each category. I spoke to top-tier service providers every step down the process. I certainly don't like to waste money, but I wasn't *forced* to cut any corners; I'm up 7-figures in trading profits over the last 6 months, and see this as much an intellectual exercise as anything else. My audit/accounting team is #1 on the 2009 list. I ended up going with a one-man shop for legal, but only because he's more experienced in CPOs than the #1 legal firm on the 2009 list. http://www.iinews.com/site/pdfs/IIMag_Nov09_ShartsisFriese.pdf In terms of prime brokerage, I wouldn't be able to get an account with GS directly, but I had lots of mini-primes looking for business on Goldman's behalf. Commission minimums typically had to be ~$5k a month, but I'm currently doing ~$10k a month in commissions, so they all wanted business. Maybe my earlier description wasn't clear, but it's not a LLC-asset pool. It's a LLC management company with LP for the fund, which is by far the most common structure for onshore funds. I also have a plan in place for transition into master-feeder, (< $10k in cost), if/when off-shore money becomes an issue.
I think a lot of this depends on where your investor base is coming from. If you have private individuals that you know personally and there are strong relationships in place, along with a word of mouth reputation, then the expenses are minimal. If you plan to take it more "professional" and start seeking capital from FoFs, investment firms, etc., then the expenses rise. A lot of it has to do with FINRA. Some funds launch with that roadmap in mind, nowadays, this is very difficult. If you are working from an existing investor base and expanding through them, then it is obvious best to keep it simple. You guys probably did not need to argue till the Thread Starter at least responded. Maybe he got overwhelmed by the discussion. Either way, it was a good read.
Thank you everyone for the responses! It wasn't my intention to create a heated debate so I apologize if my original post was vague. So we're definitely looking to go the friends & family route and keep expenses as low as possible. Correct me if I'm wrong, but this thread has mentioned forming a LLC-Asset pool or a combined LLC/LP as viable? Some specific questions I have: Is an asset pool constrained to the exact same requirements by the SEC to register over $25MM in assets or over 15 clients? What other stuff is it limited by? Are there any major differences between an asset pool and a registered hedge fund? Or is an asset pool identical to an unregistered hedge fund and we're just playing semantics? Has anyone gone the IB Friends&Family route and just used the LLC as the master account? IB handles a lot of the paperwork and going this route seems simple but not as robust for long term growth. Is it worth incorporating it in Delaware for a small operation like this?
Your questions are getting more detailed...check out GreenTraderFunds for verbal help. [I don't work with them or use them, but they seem reasonable]. A lot depends on where/who you are raising assets and if you have an auditable track record that is scalable, otherwise you are spending money for a structure you don't need.