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:

Make sure the hedge fund manager has a real office.
They use service providers.
They invest in an experienced team.
The have a very strong advisory board.
They have training for their hedge fund employees, after they join.
The systems that they have in place.
They have processes in their hedge fund business documented.
The level of risk management for the hedge fund business is high.
The research that they use to make decisions.
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

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:

Avoid one-man hedge fund shops. If something happens to that one person, the hedge fund will surely suffer.
The hedge fund does not have an administration firm.
No ability or track record of raising capital.
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.
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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