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Hedge Funds in Japan

The environment for hedge funds varies drastically by country.  In Tokyo, Japan a hedge fund manager might encounter tougher regulations and higher taxes than in, say, Singapore or Switzerland.  In this video recorded in Tokyo after speaking to the Hedge Fund Congress in Japan, I talk about family offices and hedge funds in Japan and how Japan is different from other Asian countries in terms of regulation, available services, industry growth, taxes and other areas.


Video Transcript/Summary: The strategies and tips provided within this video module include:

  1. Family offices in the traditional sense are not available in Japan so family offices are growing in neighboring locations.
  2. There is an enormous amount of wealth being created in Singapore. 
  3. If you are looking to start a hedge fund in Japan you will encounter a lot of regulation and the process could take a very long time.
  4. Singapore offers a much easier, quicker hedge fund startup process.
  5. Taxes in Japan are comparable to the US, while Singapore has the most business-friendly tax environment.  

Transcript for Hedge Funds in Japan

Hello, this is Richard Wilson. I’m coming to you from Tokyo, Japan today. I just finished speaking at the Hedge Fund Congress in Tokyo downtown. And what I want to do is share with you an update just on family offices to family office wealth management industry and the hedge fund industry here in Asia. This summer I’ve been traveling around to Singapore, Hong Kong and Tokyo, Japan and I wanted to just share what I’ve learned about what’s going on in these areas.

First off, family offices aren’t really allowed in this very sense or the term in Japan due to regulations, so really what they have here is retail banking and you get more service basically if you’re a high-net-worth or ultra high-net-worth professional. What that means is that family offices in other areas are going faster than others would, because people in Japan don’t really have the type of service here. So family offices in Hong Kong, China and especially Singapore are growing very quickly, that’s what’s interesting about Singapore, is that just in the last year and a half over a million new people have moved to Singapore and it has grown from 4.2M up to over 5.5M people.

The amount of wealth there is enormous. It’s one of the richest cities in the word that has more billionaires per capita than any other place in the world. Also, 1 out of every 25 people in Singapore is a millionaire. Now, when it comes to the hedge fund industry, what I’ve been learning here is that if you’re going to start a hedge fund there’s so many regulations in Japan. Often times it can take 6, 8, 12 months to start a hedge fund. There’s a lot of red tape, whereas if you start a hedge fund in Hong Kong, your rent and your expenses are higher, your overhead is higher. It’s a little bit more expensive, where if you start a hedge fund in Singapore, you can get registered typically within 2 to 4 weeks to open up your fund for a third of the cost. What it might cost you in Hong Kong is a lot lesser in cost here in Tokyo. So the result is that a lot of people are going to Singapore.

When it comes to taxes, which affects both family offices and hedge funds, the tax rate here in Japan is around 40% and Hong Kong I’ve heard it’s around 16% and in Singapore I’ve heard it’s around 11% to 13%. So basically Singapore has the best tax situation and tax environment for both wealthy individuals and hedge fund managers. Hong Kong comes in second with higher taxes, around 16% but also higher cost of living than Singapore. And then Japan is sky high in terms of taxes. It’s pretty close to the United States.

So if you think about where to start a hedge fund, Singapore and Hong Kong have the least regulations and least expenses for getting started. They have lower expenses in operating than Tokyo and lower taxes. And because Singapore is the easiest to work in, the least regulation, the lowest taxes, there’s just this huge influx of assets and money coming to Singapore. I’ve heard Indonesia, Malaysia, New Zealand, even Australia, Japan and China, lots of people are going to Singapore. I imagine it’s going to keep on growing very quickly and that’s the number one lesson I’ve learned traveling here in Asia and speaking at a few conferences and meeting with lots of different wealth management firms and hedge fund managers is that Singapore is really becoming a huge hub for growth in the future.

Of course China, Hong Kong, Tokyo, all these other big cities and lots of further growth and emerging markets, as there are some other, I’ve heard they have huge markets already. I do think Singapore is going to be the head of where a lot of business is done in the future. So I hope you enjoyed this update on Asian hedge funds and family office wealth management industry here in Asia. I know it wasn’t really in depth. For those of you wondering how things worked over here or you’re looking to raise capital in this region or if you’re looking to start a hedge fund and you’re based in Asia or near Asia and you’re wondering where in Asia possibly to start your hedge fund, I hope this video helps you on your way and to give research on that topic.

Thanks for joining me. I’m Richard Wilson and we’ll see you again soon.

When hedge fund managers are deciding whether to start a hedge fund in Japan they must consider the amount of regulation and level of taxes compared to Singapore or Hong Kong.  I hope that you enjoyed this update on hedge funds in Japan.   

Your friends here at https://investmentcertifications.com

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Hedge Fund Trends

Since we started our hedge fund consulting and media firm we have published thousands of articles and written and received thousands of emails with hedge funds and hedge fund professionals.  This experience has given us a lot of perspective on trends in the hedge fund industry.  In the following video, I describe the top four hedge fund trends in the industry today.

Video Transcript/Summary: The strategies and tips provided within this video module include:

  1. Due to fraud in the news and some poor performance recently, the importance of transparency and governance has never been higher.
  2. Multi-prime brokerage.  Many hedge funds now often work with multiple prime brokers.  
  3. The use of investor databases, third party marketing and external capital raising services is on the rise.
  4. Investors want an institutional-quality hedge fund firm even among smaller funds.  

Transcript for Hedge Fund Trends

Hello, this is Richard Wilson and welcome to this video. We’re going to be talking today on the top 4 industry trends. So as we started our hedge fund consulting and media firm two years ago, we’ve sent and received over 800,000 e-mails, worked with over 1,000 hedge fund managers, and one thing that has given us is a lot of perspective on trends in the industry. We write daily on hedgeblogger.com and try to pick through news items and different trends we’re seeing in the industry and interviews we’ve done and share them with the industry. And we just want to share what we see as the top 4 trends right now.

If you’re a hedge consultant, service provider, a hedge manager or looking to work in the industry this could be information which can make your business more profitable or advance your career much more quickly by positioning yourself as one of the people whose on top of these trends or who understands it and has taken advantage of what’s about to happen or what is happening. So now let’s get started here.

The first trend is that due to fraud in the news related to hedge funds, some poor performance and some unclear hedge fund policies, not gaining clauses, et cetera. The importance of transparency and governance has never been higher. Those firms should be very proactive in being transparent and having great governance will have an advantage if you’re looking to interview the hedge fund. You can become somewhat of an expert on transparency, 50 ways of hedge fund can become more transparent or 20 things that should be in place for you to have a very strong governance. It’s a huge advantage.

If you’re a hedge fund manager and you’re very proactive on being transparent, doing monthly reporting or weekly reporting on various aspects related to risk or your operations, or you’re very advanced and have best practices in place for governance, that’s a huge advantage because most professionals, most hedge fund managers don’t mention these things when they market their hedge funds. Those that do they’re not always doing that well and if you can consistently be proactively ahead of the curve in these two areas, it will be a huge return on your investment of time and money.

And so I see this as a growing trend and a place where managers with less than a billion under management can put these things in place without having to spend $20M in infrastructure or on certain software and technology. These things can be put in place relatively in low amounts of capital. So those are two very important trends.

Another important trend right now is multi-prime brokerage. I don’t know of many hedge funds with over $100M that do not work with three or more prime brokers. And now what hedge funds are doing is once they get past $5M in assets they’re putting $1M to $2M or $3M with a second prime brokerage firm and after they get past $30M most that I’ve been speaking to are looking to place some assets with a third prime broker. There definitely is a large push by prime brokers to retain more assets and more hedge fund managers so hedge fund managers or sometimes ordinary or two change prime brokers, but there definitely is a trend of a multi-prime brokerage model. Technology companies I speak to are saying a lot of the popularity within their multi-prime technology platforms and the prime brokers I’m speaking to, it meant that they’re often working alongside competitors when serving their clients.

The third trend that we’re seeing here is the use of outside capital raising resources. Most hedge funds have trouble raising the amount of capital they would like to raise; almost everybody would like to be managing more capital. So the use of investor databases, third-party marketing and external capital raising consultants is on the rise. If the hedge fund industry is based on competitive knowledge and we are knowledge workers and time is money because the faster we work, the more capital we can to raise, the more risk we can manage, the more solid investment decisions we can make then it just comes natural that if you can hire an expert in marketing to help you move up that learning curve faster is going to save you money and add value to your firm long-term, instead of spending 300 hours yourself completing your own database of investors, you go to an investor database company and you buy a few investor databases, if that’s, say 200 hours then you might have saved yourself $20,000 or $15,000.

And this is one area that I think will only rise because not only is the hedge industry becoming more competitive but other industries such as commercial real estate, cash management, traditional fund management, they’re all becoming more competitive and what that means is that one investors like a wealth management firm, let’s say Gen Spring Wealth Management, a very large wealth management firm, they’re getting hit from all sides more often. So it’s really exponentially growing the number of inputs they have to them, which means you need to get to your investors faster in multiple modalities, multiple types of marketing materials and you’d be sending them things in the mail, over the phone, over e-mail and you’d be reaching deeper into the market. Maybe going after some investors which aren’t brand name investors which are being sought after by 10,000 different investment companies a year for capital.

So because of all of those factors these capital raising tools are becoming much more important. If you’d like to learn more about third-party marketing we have a free blog with over 200 resources at thirdpartymarketing.com and we have some databases at investordatabases.com.

The fourth trend which is really growing and is more all encompassing and probably more important than any of these others is that investors want an institutional quality firm. They want to have the operations or risk management, the research, the pedigree of a billion-dollar plus firm in a much smaller structure. So to meet that need what’s happening is hedge fund managers are hiring independent administration firms, hiring capital raising experts, they’re hiring technology firms to put into place, best practice, infrastructure, reporting and transparency. This relates to the first trend on transparency and governance but it’s much wider.

Being an institutional quality means having the right professionals on the team with the right experience and talent, having the right type of service partners which appear to be institutional quality and our institutional quality. And it’s really important that a fund manager nowadays promotes them self and has all the things in place that show tangible evidence of being an institutional quality firm on a proactive basis because everybody would like to have these things in place, but hardly anyone does. And so if you have these in place even before the investor asks for it or when the investor ask for something such as a compliance report, you have it and could send it within a half hour, that’s an institutional quality response and they can feel that and it will be obvious, whereas if you don’t have these things in place or can’t produce them that will also be obvious.

But it’s just a growing trend that the decision on whether an investor invests or not is more and more being based on this institutional quality factor than it is on track record or a team alone or a transparency in governance. Lots of it is really about the institutional quality of the firm. So I hope these 4 trends help you understand things that are developing in the industry, ways you can position your service provider firms, ways you could position your hedge fund or ways you could position yourself and your knowledge in the hedge fund industry.

So thank you for your time in joining us here today.

The hedge fund industry is constantly changing.  I hope that this video has given you a good update of the top four hedge fund trends. 

Your friends here at https://investmentcertifications.com

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Hedge Fund Problems

Many hedge funds run into problems in the day-to-day operations of the fund but struggle to solve these problems quickly and effectively.  In the following video, I explain a couple strategies for solving some of the problems that may be holding your hedge fund back.

Video Transcript/Summary: The strategies and tips provided within this video module include:

  1. Forget about contacting new investors.  This may seem counter-intuitive but many managers look past the problems at their hedge fund and just put more efforts into trying to contact new investors.
  2. Use the four why tool for solving your hedge fund problems.
  3. Just one under-performing area of your hedge fund business could be holding back the performance of the entire hedge fund.
  4. So it’s important to figure out what the bottleneck is that is causing your hedge fund problems and eliminate it.

Transcript for Hedge Fund Problems

Hello, this is Richard Wilson and today we’re going to talk about something you can do to break past maybe a bottleneck that’s holding your hedge fund back. Basically, a while ago I wrote an article, the title was Forget about Contacting New Investors. And the reason I wrote that is that lots of people come to us looking to purchase investor databases or getting new strategies in capital raising and often times they already know the answer to what they need to do but they haven’t asked themselves any questions to figure out what that answer is. And it may seem illogical to forget about contacting new investors but if that’s not the bottleneck holding you back, if investors is not the thing slowing you down, you may want to figure out what the thing is that’s slowing you down and remove that roadblocks so then you can move forward faster and be more efficient with everything else that you’re doing.

For example, I use one system called the four why process and basically what you want to do is ask yourself questions related to your problem for a very specific continual questions until you find the answer. And usually one question is not enough, usually you have to ask it 3, 4, 5 times. But it’s called the four why tool. The first question could be, “Why don’t we manage a $100M in assets?” And the potential answer could be, “We’re not raising capital from wealth management firms like we had planned to.” And a next question might be why, “Why haven’t we done that?” The potential answer could be “That are marketing materials have not been brought up to par with competitors and they’re too light. And our investment process is poorly described.”

So you might ask yourself again, “Why is that?” And the answer could be, “We know that we should be paying a consultant or an in-house marketer to help with both marketing materials and generating relationships but we have not hired one.” “Why is that?” And the final answer could be something about “We do not have the profits available to hire a full-time marketer but we should get around and create a new system to share equity, grow relationships with third-party marketers or build a marketing related advisory board.”

So after 4 questions you get down to some pretty granular answers that point to possible solutions like a marketing related advisory board, growing relationships with a third-party marketer. You know sharing equity, to hire someone in-house and start training them. So that kind of breaks it down and what happens is you could get that answer from why don’t we manage $100M in assets but it’s not a direct link to when you break it down the more times you ask why, why, why, why? Then the answer presents itself as stated within the question that the answer becomes included within your question.

So that’s one tool that businesses have used to grow their business in every industry and you could have 20 factors which determine the growth of your hedge fund and just one of those 20 not performing well or not being as high quality as it should be can hold back your whole fund despite the performance of the other 19. So sometimes these types of questions can help zero in on that one thing that’s holding you back which you might not be able to see because you’re so close to the problem on a day to day basis. And that this is something that I think clients could use more often and I’ve used it within my own business and that it really does help zero in on the things that are holding you back.

So I hope this tool helps. It’s called the four why tool. And thanks, we’ll see you again soon.

I hope that this video has provided you with a couple strategies for figuring out what is holding back your hedge fund.

Your friends here at https://investmentcertifications.com

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Institutional Investment Consultant

If you are wondering, “What is an institutional investment consultant?” then this video will be very helpful.  In the following video, I provide an institutional investment consultant definition and an overview of the services that institutional investment consultants offer.

Video Transcript/Summary: The strategies and tips provided within this video module include:

  1. An institutional investment consultant is a person who is hired as an expert on investment managers and analyzes these investment funds for institutional investors.  
  2. The institutional investment consultant will typically help construct and even manage a portfolio of investment funds for their clients.  
  3. Institutional investment consultants will either have a discretionary or non-discretionary relationship with their institutional investor clients.
  4. So, an institutional investment consultant will have access to a collection of institutional investors.  This can be a highly valuable relationship for hedge funds and private equity funds looking to access institutional investors.
  5. However, many of these investors require a high level of assets under management in order to be considered.  

I hope that this video has helped you to better understand what an institutional investment consultant is and what services they typically provide to institutional investors.

Your friends here at https://investmentcertifications.com

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The Ocean-Ready Hedge Fund Business Model

Many emerging managers and hedge fund startups mistakenly believe that just because they have a great strategy investors will eventually flock to their hedge fund.  Hedge fund investors like to see that you have a strong hedge fund business model and that you are of institutional quality.  In the following video, I provide some tips and strategies for getting your hedge fund ocean-ready.

Video Transcript/Summary: The strategies and tips provided within this video module include:

  1. If you go out to meet investors too quickly, you could do a lot of damage to your hedge fund.
  2. Some funds are too eager to raise capital and present their fund at a point when the fund is not yet at 100% and you risk losing that investor forever.
  3. You want to have all your marketing materials and your investment strategy prepared and well-polished.
  4. It’s ideal to have a lot of investors and consultants that will give you some advice early on in your fund’s lifetime and many managers try to launch so fast that they have not developed these relationships.

Transcript for Ocean-Ready Hedge Fund Business Model

Hello, this is Richard Wilson and today I’m going to talk to you from here in Nice, France about making your hedge fund business seaworthy or ocean-ready. Well, I’ve been learning more about sailing in these past few years while raising capital and working in a hedge fund industry. And I think one truth about a hedge fund industry is that if you launch your hedge too quickly and you go out and meet with investors too quickly and too many different types of investors too quickly, you’re going to get recorded in different institutional databases as being unprofessional, as not having a clear investment process. You’re going to do a lot of damage.

I even spoke with somebody at the game 2011 conference last week about this. And they said that they only represent and they only raise capital for fund managers within in their first 6 months of launching their fund, because otherwise they’ve probably already done so much damage for themselves in the industry, that’s a waste of their time but you can work with them. I think that’s a little bit extreme but I think the advice goes along with what I’m trying to tell you right now is that when you’re sailing in a bay as many sailboats do here around Nice, you can have some things that aren’t totally working well in your boat.

Your rigs cannot be set up right, your ropes could be loose, maybe a couple of your sails are in bad shape, maybe the things on the walls of your sailboat inside the boat aren’t really secured. But if you go out in the ocean you really need to be kind of sea-ready or ocean-ready or seaworthy. In other words, if you get in a storm or if you go over a bunch of swells you don’t want things flying around inside the cabin of your boat. If you need to have your main sail work because your engine dies, you really need that main sail to work. You can’t really rely upon, you got a coast guard in the bay that he’d come, tow you over 50 feet to your dock. It’s much more serious when you’re out in the ocean.

So it’s really a great analogy for running, starting and growing your hedge fund because before you go out and meet with very important investors, you don’t or you have a great relationship with, you really want to have everything walked down and in place. You want to have your marketing materials, kind of in grade A shape, institutional quality, everything that you’ve shown an investor you want to have looked at 5 times by people in your team, do the fifth draft, have it compliance approved. If somebody is going to ask you for a standard DDQ or a question that comes in a standard DDQ you should be able to answer within one business day, not a week or two.

Everything you do in your business should be well-polished by the time you’re meeting with new investors. Hopefully when you launch your fund you’re able to balance ideas off of consultants, advisors, service providers and some investors you already have good relationships with, then that’s how you get the important feedback and really figure out what’s your checklist, what’s those 20 or 30 things that you are kind of seaworthy before you go out and start meeting with investors face-to-face about your fund.

And this is something that I think is a common mistake to make. People want to get out there and raise capital really quickly, you know speed an implementation, just get out there and meet with investors and get great feedback, but really you need to be very cognizant of the fact that if you do that too early and too fast, you’re really going to hurt yourself and you could sink your boat very on in the process, whereas if you just take that first valuable piece of the feedback from your investors, really use it, implement it, and evolve your fund at higher levels before taking it out to 300 different investors, you’re going to be much better off in the long run.

So I hope you enjoyed this video. It’s Richard Wilson coming to you from Nice, France and we’ll see you again soon.

Before you go out and try to meet with investors to present your fund it is important that you have your hedge fund business model well-established and storm-tested so that it can stand up to inspections by hedge fund investors. 

Your friends here at https://investmentcertifications.com

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Hedge Fund Seeding

The hedge fund industry changes rapidly from one year to the next. If you are trying to secure hedge fund seed capital you may be wondering what the current environment is for receiving seed capital. In the following video recorded in Monaco, I speak about how the hedge fund seed capital industry has evolved in the last twenty-four months.


Video Transcript/Summary: The strategies and tips provided within this video module include:

  1. There used to be many more large hedge fund seeders, now there is about half of the hedge fund seeders than existed pre-financial crisis.
  2. Typically, most hedge fund seed deals are for $10-30 million.
  3. Hedge fund managers have less room to negotiate than they used to have because there are no longer multiple offers presented to a manager and the fund is considered lucky to receive one or more.
  4. Each seed provider typically invests in 2-4 managers a year so it’s very competitive.
  5. The hedge fund team is still the most important focus for hedge fund seeders.
  6. There are diverse business models in the hedge fund seeding industry today, some will ask more than others such as requiring you to move to their location or investing your own equity.  
Transcript of Hedge Fund Seeding

Hello, this is Richard Wilson and today I’m going to talk to you about the state of the seed capital industry. I just finished listening to a panel of 5 hedge fund seeders. I’ve also been helping an institutional investor find emerging managers to invest in. And I thought I could update you guys on how the industry is going, what’s changed and really what it looks like for those seeking seed capital. There used to be around a hundred seeders out there mostly backed by big banks. Nowadays, there’s 20 to 30 well-known ones, maybe 5 or 10 that are kind of hiding in their shadows at the industry but there’s really about one-third and one-half of the amount of seeders that there were pre 2008 crisis.

Typically now most seed deals are for $10M to $30M and the seeders are asking for more than they used to and really the managers don’t have any room to negotiate because they’re lucky if they can get one or two seeding deals, where in the past some managers would get 5 or 10 seeding deal options, then you kind of pick and choose and pick people against each other and get a great seeding deal out of it.

Next, typically each seed provider will only seed 2 to 4 hedge fund managers a year. It’s very rare for them to put $50M or $100M then, usually like I said, it’s $10M to $30M and they’ll only work with 2 to 4 managers a year, so they’re pretty selective and it’s very hard to get a seed capital right now.

Team is still the number one deciding factor when people are getting seeded. That’s been my experience and the experience of the institutional investor I’ve worked with. It’s been the experience of family offices I worked with. That’s also been the experience of these seeders I just listened to on the panel. The team you have and their deep experience related to your investment strategy is a number one thing that people are going to look at more than anything else regardless of what strategy you have. So getting a great team in place is going to give you more bank for your buck than doing anything else while starting up your hedge fund.

The last tip here is just that there’s diverse business models in the seeding business right now. Some of the seeders would force the person getting seeded to move to a place like Amsterdam or London or some place in Switzerland. Other seeders will want you to put up risk capital so they’ll match $1M with $9M of their own so you can get up to $10M very quickly. Other seeders will want equity ownership in your company or in your fund. Others will want to feed breaks plus equity. The options are really very diverse. But it’s not really your option as a fund manager, it’s really the seeder’s option and you really don’t have much negotiation power. You’re basically turning down the offer if you try to negotiate more than just a little bit with them.

So I hope this update on the state of the seed capital industry is helpful if you are searching for a seed capital. This is Richard Wilson coming to you from Nice, France and I’ll see you again soon.

In my hedge fund career, I have helped new and emerging hedge funds get seeded and I have also assisted an institutional investor in seeding a hedge fund.  If you are an emerging hedge fund manager or looking to start your own hedge fund, I hope that this video provides you with a better idea of the current hedge fund seed capital environment.  

Your friends here at https://investmentcertifications.com


 

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Securing Hedge Fund Seed Capital

Securing hedge fund seed capital can be a tiring and confusing process.  To help make the hedge fund seed capital process a little easier to navigate, I have recorded the following video with direct tips and strategies for securing hedge fund seed capital.  If you are an emerging manager or looking to start a hedge fund, this video will be very valuable to you.

Video Transcript/Summary: The strategies and tips provided within this video module include:

  1. Have a deep and well-experienced team and advisory board.
  2. Have a real track record that proves your strategy works.
  3. Have a consistent investment process that you follow every day.  This will show investors that you can consistently provide positive returns.
  4. Have a massive focus on transparency and governance.
  5. Make sure you have your basic marketing materials in place and professionally developed.  

In my hedge fund career, I have helped hedge fund managers get seeded and I have helped an institutional investor to find hedge funds to seed.  I hope that this video helps you get seeded if you are trying to seed your hedge fund.  

Transcript for Securing Hedge Fund Seed Capital

Hello, this is Richard Wilson and welcome to this short video on tips for getting seed capital. I’ve been working with hedge managers for several years now. I helped trained over 500 in capital raising and hedge fund marketing. And during that time I’ve helped managers get seeded. I had also helped an institutional investor that I’ve partnered with, find more hedge fund managers to seed and often times managers come to me and ask, “How can I get seed capital?”

And it’s a complicated question but there are some quick bullet point tips and pieces of advice that I could give you. They’re going to increase your chances of getting seeded and I don’t think many people share this type of information so I just wanted to create a short 3-minute video to hopefully help you get seeded if you’re looking to start your own fund.

The first tip is to have a deep and balanced team. If you don’t yet, get one before you apply for seed capital. Otherwise, you’ll be known as maybe that one-man shop which some people will still see the one-man shop but you’re going to increase your chances by a having a deep and well-experienced team and a great advisory board as well. The next tip is to have a track record in place, even if it’s only a 4 to 5 months. You need to have a real track record. Yahoo, you know virtual stock portfolios only go so far with real investors.

Another tip is to have a consistent investment process that you follow every single day within your fund because you don’t want to be seem as someone who gets lucky or has kind of transient skill that comes and goes from weeks to months. They want to have a very consistent rigorous and robust risk management investment process, that’s really important. You should be able to explain it at the 5,000-foot level so people understand what you do. There’s a static that says that 78% of institutional investors won’t invest unless they know exactly what you do. And you can bet that when you’re a small manager looking to get seeded and people are worried about you going out of business or not doing well possibility and they’re putting a lot of money in you, they’re going to really want to understand exactly what you do. So make sure that’s really clear.

The last two tips. Have just massive focus on transparency and governance, be over transparent, have more governance than your competition and just work on meeting with people and getting training on exactly what that means and how you can put it in place. And the very last tip is make sure you have your basic marketing materials in place. Make sure you have a PowerPoint presentation and a one-pager at the very least so you’ll look professional when you sit down with somebody and then you’ve thought through all the steps of launching you fund, you have the right service providers and partners in place, and really just present yourself professionally with your best foot forward, so you don’t look like you’re an unprepared person who just came up with an idea a month or two ago.

I hope you enjoyed these tips. This is Richard Wilson coming to you from Monaco and we’ll see you again soon.

Your friends here at https://investmentcertifications.com

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Hedge Fund Business Investment

An important part of running any successful company is reinvesting in the business, a hedge fund should be no different.  In the following video, I provide you with ten signs that a hedge fund is investing in their own business.

Video Transcript/Summary: The strategies and tips provided within this video module include:

  1. Make sure the hedge fund manager has a real office.
  2. They use service providers.
  3. They invest in an experienced team.
  4. The have a very strong advisory board.
  5. They have training for their hedge fund employees, after they join.
  6. The systems that they have in place.  
  7. They have processes in their hedge fund business documented.
  8. The level of risk management for the hedge fund business is high.
  9. The research that they use to make decisions.
  10. The quality of their marketing materials.  

I recently spoke at the GAIM conference in Monaco and many hedge funds were looking for ways to show investors that they consistently invest in their hedge fund business.  These ten signs will give you a better idea of whether the hedge fund manager is, in fact, re-investing in their hedge fund business.

Transcript of Hedge Fund Business Investment

Hello, this is Richard Wilson and welcome to this short video on 11 signs that a hedge fund manager is reinvesting in their own business. I’m coming to you from Nice, France today where I was in town recording some training videos for the hedge ground and I just spoke in Monaco, next door, at the game. I had a conference with about 800 people there. And it was really interesting a while there. It was obvious that both hedge fund managers and family offices attending were very interested in knowing more about how to reinvest in their business the right way and how to make it obvious to investors or the hedge fund managers taking their business seriously and really reinvesting in their own business and taking it as something that, you know it was long-term venture and not something they’ll set up and try to make a million dollars in one year.

So the first thing they should look for is to make sure the hedge fund manager has a real office and that they’re not just running the fund out of their house or their garage. You know if somebody is taking their seriously they may have rented an office space or have an office for their employees as their fund grows. The second thing is they have service providers. Many times people try to do their own fund administration when they’re starting up but they don’t have a time broker to start with. If they’ve taken their hedge fund seriously and spoken with people they know, they have to have certain service providers in place. They should have an auditor, they should have an accounting firm, they should have a current brokerage firm, they should have a fund administration firm, they should have an attorney they go to, a compliance legal expert. If they don’t have those things in place, they haven’t done the very basics.

The next thing is team. This is the most important thing. If they have really taken their hedge fund seriously, they’re invested in their team. They have people with great experience, 7-10 plus years experience on their team and at the very least a very strong advisory board. Advisory boards just take a lot of work and creativity. If somebody doesn’t have a strong advisory board in place then it’s really hard to believe their taking their hedge fund business very seriously unless they’ve just started out and they have great bench experience on their team. That’s the only excuse they could find for not having a great advisory board in place.

The next sign is someone who has invested in their hedge fund is that they have training for the employees after they joined. In the hedge fund industry everybody values experience like gold until you come in the door and then almost nobody trains their current team. That is non-sub $1B hedge funds. Lots of large hedge funds do train their team consistently and very thoroughly. But most hedge fund managers under a billion dollars have no training systems in place for anyone on their team, which is I think really ironic given how valued a hedge fund experience is in our industry.

The next sign is someone who has invested in their hedge fund is the systems they have in place, the technology, the trading systems, the reporting systems, how everything flows through the business. You can really tell if it’s really segmented and not working well but how quickly people respond to requests for certain type of data and that you can just really tell someone has reinvested in how they run their business based on their technology and the reporting and trading the systems they have in place.

Next for your tips include having processes. All of the procedures and processes in your business should be documented so that when a new employee comes into the hedge fund, they just look at what processes are related to their responsibilities, they know how things are supposed to be done, everything in the hedge business should be done systematically, almost nothing is done only time. There should be a process for doing everything. In this way if you needed to replace someone on the team or God forbid, the principal of the hedge fund dies, the hedge fund can still move on and follow the same investment process, the same risk management techniques and the same capital raising strategies.

The last few tips here, the level of risk management in the firm, if somebody takes a lot of research, hard work and reinvestment in the business, you know had a very elementary risk management techniques just in how they chose securities, there’s really not enough to cut it anymore. They need to manage operational risk as well as portfolio risk in many different types of ways. So if the manager is not, then that’s a big sign they haven’t reinvested in their own business enough.

The last two tips. They research they use to make their investments, the experience on their team, how do they make their decisions, what’s the quality of information coming into those decisions, and lastly finally is the level of quality of their marketing materials. If their marketing materials looks like a college project or a high school then that says one thing, if their marketing materials look like something from Wall Street, coming out of Merrill Lynch or Goldman Sachs, it says something completely different.

So just to review real quick, the top 10 things that show the hedge manager is reinvested in themselves included their office space, their service providers, their team, their training for their team, their systems, their advisers or board of advisers, their processes and procedures, their risk management, their research and their marketing materials.

This is Richard Wilson. Thanks for joining me. I’m here in Nice, France and we’ll see you next time.

Your friends here at https://investmentcertifications.com

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Warning Signs for Hedge Fund Investors

Investing in hedge funds is very different from investing in traditional investments like stocks or mutual funds.  In the following video, I point out five warning signs that hedge fund investors should look out for while investing in hedge funds.  This should not be considered financial advice, rather it is a few red flags that hedge fund investors should watch out for.

Video Transcript/Summary: The strategies and tips provided within this video module include:

  1. Avoid one-man hedge fund shops.  If something happens to that one person, the hedge fund will surely suffer.
  2. The hedge fund does not have an administration firm.
  3. No ability or track record of raising capital.
  4. No marketing materials.  A hedge fund is wasting your time if they haven’t taken time to compose their thoughts and strategy in easy-to-understand marketing materials that give you all the necessary information to make a well-informed decision on whether to invest in their fund.
  5. There is no deep experience on the team.  Don’t settle for an inexperienced team.  
Transcript for Warning Signs for Hedge Fund Investors

Hello, this is Richard Wilson. I’m coming to you from Nice, France today. I’m here recording some training videos for the hedge fund group. And today I want to talk to you about how I’ve been working with a single-family office from the United States and helping them develop criteria for identifying potential hedge fund managers to invest in.

So what I’d like to do is provide you with 5 kind of warning signs, very obvious things if you’ve been invested in hedge funds for a long time, but if you’re a family office or a wealth management firm or other type of investor, just to kind of give you a start in investing in hedge funds. There are some very basic things to look at while analyzing hedge fund managers. This is not financial advice but it is kind of just some basics on hedge fund education and now hedge fund businesses are formed.

The first thing is to avoid one-man hedge fund shops. That one person gets sick, God forbid if they died, their business is not going to be sustainable. You know multiple minds acting collectively with some organization is going to be more powerful than one person, even a team of just 2 or 3 people is better in my experience to invest in than just a one-person hedge fund.

The second thing is not having an administration firm. Since the Madoff scandal mini board of advisers of hedge funds all over the world have been forcing their hedge fund to have a third-party fund administration firm in place. As for many reasons it verifies the assets, it has some checks and balances while running the hedge fund and if you need someone who is not using the fund administration firm, you have to want to know why and wonder how serious they are about working with other types of investors like yourself.

The third thing is have no ability or track record of raising capital. If someone is at $5M or $10M or $30M on capital they may be worth looking at, maybe they’re just getting started, maybe they have an unrecognized talent on their team and a deep bench of experience on their team and you can be one of those first people to discover them. You can have huge amount of capacity in this voyage maybe very well. But many times the funds which have a lot of talent but are bad at raising capital may not survive long enough to really have a sustainable business. They don’t want to invest in a hedge fund and do all these due diligence and grow a great relationship with a hedge fund manager just to have them go out of business a year later.

So even if the hedge fund doesn’t have a lot of capital they should at least have some potential ways of raising capital and somebody on their team dedicated to raising capital, not the portfolio manager doing it 5 hours a week and not the idea that they’re going to build a track record for 5 years and then outsource it to a third-party marketer. It just doesn’t happen very often. Lots of times those hedge funds never make it.

The fourth thing is not having any marketing materials. The hedge fund manager meets with you and he hasn’t put all of his thoughts, his investment processes, risk management strategies, his past investment details, his term sheet. A service provider is all within a well-organized document and he really hasn’t invested in his business enough then he’s wasting your time. You should tell him to go back and come back to you when he has organized his thoughts within a one-pager and a PowerPoint pitch book. It’s very, very basic. So if somebody doesn’t have that they’re really not worth meeting with in most cases unless you’re doing somebody a favor just to give them some early kind of hedge fund startup advice.

And the final tip here on avoiding certain types of hedge fund managers is just the one who has no deep experience on the team. There are some teams out there that are focused on very niche areas like trading, orange juice contracts, or trading freight shipping contracts or on running a global map or a strategy focused only a few different parts of the world or focused on frontier markets specifically, maybe they specialize in 4 different countries specifically. So there’s very, very specialized people out there. There’s people that have 20 years or 30 years experience in one or two small niche areas. So don’t settle for a team that didn’t have a really experience on an area that’s directly connected to their scope of investments.

And again, it might seem overly obvious but many times hedge fund managers might have some fancy sounding model or their back testing might be amazing or they have this 3-year track record that’s amazing. But really I wouldn’t care what their 3 or 5-year track record is if they don’t have a unique position in the marketplace and don’t have a deep experience that leads them to have any competitive edge in the marketplace.

So I hope these 5 tips helped. I’ll just run through them again; avoid hedge fund managers, have a one-man shop that don’t have an administration firm, they don’t have the ability or track record of raising capital, funds that don’t have marketing materials and funds that don’t have a deep experience on their team that’s directly connected to what they’re investing in in their hedge fund.

This is Richard Wilson coming to you from Nice, France. Thanks for joining me and we’ll see you again next time.

Again, this video should not be taken as financial advice, please refer to your financial or legal adviser.  I do hope that hedge fund investors like family offices, institutional investors and high-net-worth individuals will keep these red flags in mind while investing in hedge funds.  

Your friends here at https://investmentcertifications.com


 

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Hedge Fund Seed Capital Providers

There are many qualified hedge fund traders out there that would like to start their own hedge fund.  However, it can be difficult to manage all of the costs necessary to start a hedge fund.  Fortunately, there are hedge fund seed capital providers that invest seed capital with qualified managers.  In the following video, I explain how to get hedge fund seed capital providers interested in your new venture.

Video Transcript/Summary: The strategies and tips provided within this video module include:

  1. Have an audited track record of you trading live in an account.   This will go a long way in providing evidence that your strategy can work.
  2. Create a one pager that includes all the relevant information on your hedge fund strategy and business model.
  3. The stronger that your team is, the better.  
  4. Build an advisory board that is deep with experience and talented managers that will improve the credibility of your fund.
  5. Focus on reducing volatility in your strategy and making everything as systematic as possible.
  6. Be self-invested in the fund.
  7. Stay flexible.

I hope that this video has given you some valuable tips on getting hedge fund seed capital and on how to attract hedge fund seed capital providers.  

Are you starting a hedge fund?

If you are starting a hedge fund or you are an emerging manager interested in getting seed capital for your fund, we may be able to help.  We have partnered with institutional investors that are looking to allocate $750 million to hedge fund startups and emerging managers.  If you would like to apply for seed capital, please see this free application.

Transcript of Hedge Fund Seed Capital Providers

Hello, this is Richard Wilson. I’m coming to you from Madrid, Spain in a short video on how to get hedge fund seed capital for your new venture, whether you’re a trader, starting a fund, an emerging manager or something coming out of a large bank or a hedge fund starting your fund and how this video will help you get seeded faster.

My first tip is to have audited trading track record returns. Lots of people have a Yahoo stock portfolio or a virtual portfolio or back tested results based on some model they developed. It really doesn’t mean much unless you have an audited track record when you’re trading live in an account, even if it’s only $50,000 or $100,000 as long as you’re trading these in that same investment process that you would after getting seeded, that’s fine. People are going to respect that a lot more than just an idea that might work in the real life. So make sure you have an audited track return.

The second thing is for you to have your basic marketing materials in place, a one-pager, either one side or one side front and back that says, what your trading strategy is, who is on your team if anybody, what your investment process is, what your track record has been, who your service provider partners will be or are right now and have your pitch book 12 to 20 pages long and a PowerPoint pitch book developed. So having these put together, they look more professional and more like a real business in the average person that goes out and the values they get in hedge fund seed capital.

The next thing to remember is that the stronger your team is the better. And I doubt that you might not have unlimited resources to recruit people who have lots of experience for your team, but there’s ways to build your team without a lot of money. First you can give away equity. You can give away percentage and profits. You can give away equity and percentage of profits based on whether somebody stays with you for 5 to 7 years or more. And you can also build your advisory board.

Building your advisory board with people who have really a deep experience in running successful hedge funds, raising capital for hedge funds, approving the operations of hedge funds is a great way to add credibility because with the very low investment of capital on your part, you could be associated with very credible people who are in authority either in the hedge industry or in your asset class specifically. So building out your team is very important. People are going to look at your team just as closely as they’ll look at your trading strategy and the risk that you take in your portfolios.

Another tip is to focus on reducing volatility in your strategy and making everything as systematic as possible. You’ll want to keep your investment decisions as consistent as possible and you want to avoid at all cost making it look like your strategy is based on some part in getting lucky or your past returns again based on getting lucky with market timing or lucky in your stock picks. You want to show that your decisions are based on a system that day after day is going to produce great risk adjusted returns for that person who is going to seed your fund.

There’s two more things you should look out for when trying to get a hedge fund seed capital. The first is that you’re self-invested in the fund. 100% of your liquid net worth should be invested in your fund. If it’s not, as much of your liquid net worth as possible. Now, don’t take this as a financial advice, you should seek your own financial professional’s advice if you’re trying to decide where to put your own money. But from an investor’s perspective, the more of your own net worth that’s invested in your funds the better because it shows that you are going to cut risks as fast as possible. You’re going to cut loses as fast as possible, if the market starts to go down and your portfolio starts to not work as well. So the more invested in your fund, the more that you invest in your business the better.

And the final tip is to stay flexible. Your getting a hedge fund seed capital, people are going to want aggressive deals. They’re either going to want part equity in their fund or they’re going to want an advisory board spot in your fund, but then you want to actually have you put out something called risk capital so that the first loses in your portfolio come out of your capital instead of a part of theirs. This might be something you aren’t comfortable with at first, but I would encourage you to be flexible.

Often times if you don’t get seeded or you don’t get started then you’re never going to attract those investors a year or two down the road, you might never start your hedge fund, you might never get $30M, $50M, $100M and your hedge fund may never exist. So be flexible. There’s going to be creative things that are asked of you and you’re going to have to step back, tell them you need a couple days to consider it, talk to your team and advisory board and just keep an open mind while working with seeding platforms.

So I hope you enjoyed this quick video on Hedge Fund Seed Capital and how to get seeded. I hope it helps you in reaching your goals and starting your fund. This is Richard Wilson coming to your from Madrid, Spain and I’ll see you next time.

Your friends here at https://investmentcertifications.com

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