Hello I am interested in starting a Hedge Fund, however once you get past "friends and family" as investors, you need a 3-5 year track record as a fund manager/etc before institutional money will look at you. What is a recommended method to establish a "track record"? Form an RIA business and perhaps manage non-profits, churches, etc portfolios? Or just manage the "friends and family" portfolio during that time, meanwhile trying to raise more investors on your own? Also, is an MBA necessary for "added credibility" or should I just concentrate on fund performance? Thanks ** Yes I know everyone in NYC but the cabbies wants to start a Hedge Fund....that fact aside, I am looking for info regarding the above questions......thanks
I hope you've got your ignore button ready...( i can just feel the unwarranted criticism from a far) In all seriousness, your question might be better suited by a few people over at wilmott.com. Its been a hot topic in the past. hope you find what you're looking for.
What you need is backing by a significant source. Most fund startups that last are ones that have one-three investors who are willing to throw in a pretty big chunk of money. You would use that money to begin betting and building up a sizable track record. What happens is that these big investors know other rich investors and by word of mouth you have a circle of people willing to invest money with you. This is how it is done and can be sustained.
The way to grow large is to have a solid infastructure (top tier service providers), be introducted to investors (whether through your prime broker, third party marketers or databases) and most importantly, have a solid track record on a scalable strategy. Get your numbers audited and provide transparency to your investors as well, anyone sophisticated will demand it. Also, strategic investors are available, who will often stake your fund in return for an ownership percentage in the fund.