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:
- 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.
- Create a one pager that includes all the relevant information on your hedge fund strategy and business model.
- The stronger that your team is, the better.
- Build an advisory board that is deep with experience and talented managers that will improve the credibility of your fund.
- Focus on reducing volatility in your strategy and making everything as systematic as possible.
- Be self-invested in the fund.
- 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.
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