Creating a Sustainable Infrastructure
Many emerging fund managers enter the hedge fund business thinking that the most challenging thing they will have to do is to raise capital for the fund. In fact, capital is no longer the scariest challenge. The scariest part of the starting a hedge fund is creating a sustainable structure in which investors can rely. This is a challenge that requires hedge fund managers to create a backup team that appeals to the prospective investors.
Investors are very careful about where they invest, which is why they need to make sure that the hedge fund has a proper back up office with a strong infrastructure that will protect their investments. The strong infrastructure includes professional and experienced prime brokers, administrators, compliance personnel and auditors. Investors prefer reputable service providers. Reputable service providers bring value to the firm and ultimately lead to more revenue.
Auditor Selection: A Stiff Challenge for the Hedge Fund Managers
With hundreds of audit firms across the country, it is really hard for hedge fund managers to select an auditor. Big audit firms offer reputable auditors that offer substantial recognition to the startup hedge funds which are trying to attract prospective investors. However, highly reputable auditors come at a price that most startup hedge fund managers cannot afford. Most hedge fund managers empty their wallets to get the most reputable firm on their side, which never does well in the long run. After all, there are other important aspects of the hedge fund that require investment.
New hedge managers need to find a small but experienced firm that can offer personalized service at an affordable rate. New managers need to understand that experience matters a lot. Sometimes a small firm can offer highly personalized service at a cheaper rate than a large firm. When it comes to hiring an auditor, look for trustworthy, experienced and passionate auditors that will bring value to your firm and create a long lasting relationship with you and your firm
Selecting an Administrator
Hiring a professional administrator is not really a challenge for those new hedge fund managers who have managed to raise enough capital. However, when it comes to hiring a professional administrator, money is not everything. Hiring an administrator from a large firm may seem like an easy option, but the large firm might not offer the personalized services that you seek.
For those new hedge fund managers who are looking for individualized administrator services, they can choose from various other firms in the market that offer experienced administrators at a lower rate. For example, various CPA firms have quality staff that is experienced in fund administration. In addition, there are various other smaller administrator service providers that offer experienced personnel for fund administration.
An experienced fund administrator can prove to be much more than a reputable fund administrator. An experienced and trustworthy fund administrator can become the hedge fund manager’s most helpful resource as the administrator and fund manager work closely. New hedge fund managers should look for experienced administration service providers that can bring value to the firm in the long-run. Experienced and loyal fund administrators can not only prove to be a valuable asset for the new business, but can also become administrative advisors for a mature firm.
Choosing Appropriate Compliance Personnel
Many startup hedge fund managers choose to have in-house compliance personnel so they can closely monitor tasks. While choosing compliance personnel, make sure that they can handle the investment tasks masterfully. The hedge fund needs to be according to the various SEC regulatory requirements and other agency requirements. So, the compliance personnel should have ample knowledge regarding the SEC requirements that might affect the performance of the fund in the near future. For example, a good compliance officer would know about the ADV filings, custody rules and other legal regulations.
Lack of adherence to the SEC regulations can lead to serious issues that even experienced hedge fund managers cannot handle. So, new hedge fund managers should make sure that they put somebody experienced in place who can guide them along.
Experienced compliance personnel come at a price, but it is worth it. New hedge fund managers usually hesitate to spend substantial investment on a compliance team, but what they don’t realize is that investing in an experienced compliance team is cheaper than dealing with SEC audits. Having a reputable team will let your investors know that you are ready to handle their investments in an effective manner. In addition, it also shows that your business mission is not just to generate revenue, but to protect investors and bring them substantial returns.
Any hedge fund manager who does not have a reputable team in place will have a hard time raising capital and convincing the potential investors.
Dinis Guarda is an author, academic, influencer, serial entrepreneur and leader in 4IR, AI, Fintech, digital transformation and Blockchain. With over two decades of experience in international business, C level positions and digital transformation, Dinis has worked with new tech, cryptocurrencies, drive ICOs, regulation, compliance, legal international processes, and has created a bank, and been involved in the inception of some of the top 100 digital currencies.
Dinis has created various companies such as Ztudium tech platform a digital and blockchain startup that created the software Blockimpact (sold to Glance Technologies Inc) and founder and publisher of intelligenthq.com, hedgethink.com, fashionabc.org and tradersdna.com. Dinis is also the co-founder of techabc and citiesabc, a digital transformation platform to empower, guide and index cities through 4IR based technologies like blockchain, AI, IoT, etc.
He has been working with the likes of UN / UNITAR, UNESCO, European Space Agency, Davos WEF, Philips, Saxo Bank, Mastercard, Barclays and governments all over the world.
He has been a guest lecturer at Copenhagen Business School, Group INSEEC/Monaco University, where he coordinates executive Masters and MBAs.
As an author, Dinis Guarda published the book 4IR: AI, Blockchain, FinTech, IoT, Reinventing a Nation in 2019. His upcoming book, titled 4IR Magna Carta Cities ABC: A tech AI blockchain 4IR Smart Cities Data Research Charter of Liberties for our humanity is due to be published in 2020.
He is ranked as one of the most influential people in Blockchain in the world by Right Relevance as well as being listed in Cointelegraph’s Top People In Blockchain and Rise Global’s The Artificial Intelligence Power 100. He was also listed as one of the 100 B2B Thought Leaders and Influencers to Follow in 2020 by Thinkers360.
