Starting and running a hedge fund is a lot of responsibility. There’s so much to organize, manage, and deal with on a daily basis. The ever present need to adhere to FCC regulations, verify that investors are qualified to invest in the hedge fund, and maintain detailed records of all trades and financial returns is challenging to say the least.
While dealing with the complexities of operating a hedge fund, there is also the need to be involved in the operations and other aspects of the business too. You may not work on the research desk full-time, but it’s quite likely that you still come up with investing ideas in conjunction with a research team.
The Priorities of the Hedge Fund
Managing the business requirements and being involved on the investing side takes up all your time. Leadership can sometimes take a back seat to the demands of the position if you’re not careful. However, you cannot let that happen because to stay aligned to the priorities of the hedge fund, all members of the team must know their part in the process. And even when they’re not so clear about how their job contributes to getting new investing ideas and delivering impressive investor returns, everyone plays their part towards these important goals.
Beating investing benchmarks like the S&P 500 index and the Wilshire 5000 index is a priority for investors to see that they are getting outsized returns, net of management and performance fees. The positive alpha over low-cost index funds must be maintained for the hedge fund to remain attractive in a crowded market. Everything ties into that objective and all employees must make that important connection.
Expanding Requirements for Greater Leadership
As the funds under management grow, there’s a need to expand the research team to increase its capabilities. With greater funds comes the need for more investment ideas. They must be generated to locate alternative places to place investors’ money.
Taking on new investment capital helps provide the additional management fees and potential for greater performance fees when the hedge fund performs well, but it increases demands too. Whether you’re overseeing the research team, or you’ve delegated that to someone else, giving proper direction and setting parameters for what constitutes an acceptable investment for the fund sometimes takes some finessing.
For instance, while venture capital investments might be out of the norm, when a suitable opportunity presents itself, the fund could dip its toe into the VC waters. Therefore, not every rule is cast in stone which can cause confusion amount research analysts and some frustration too.
To learn how to manage the different personalities, present a unified front and lead teams more effectively, leadership training is often a good idea. Sadly, suitable training at college on how to run a company is usually something left off the syllabus. You can find some training via findcourses.com which lists many suitable courses to expand your knowledge and fill in any obvious gaps. Professional training will definitely be a worthwhile investment and will teach you the skills you need to lead.
Implications When Launching Additional In-House Funds
Being successful enough as a hedge fund can lead to the launch of new funds. The additional funds will put new pressure on the company. Some research analytics may have to move into sectors that they’re unfamiliar with and might be displeased.
Expanding the investment product mix presents some unique obstacles and difficulties that aren’t always there with a single fund. Prepare well ahead of time for what will be required. Bring in new people to take over existing positions to move trusted team members over to the new fund. This way, there’s less training involved, and steadier hands are at the helm of the new hedge fund. The remaining team at the first fund is established enough to handle the staffing adjustments with ease.
Strong Leadership Attracts Top Talent
Attracting top talent is a priority for hedge funds because better people often means impressive annual results for investors. There’s a need to offer a competitive package to bring in the best people in the industry. See if the current staff have any recommendations of people who they used to work with whom they feel would be an excellent fit with the company and its culture.
With strong leadership, potential employees have the confidence to move companies. Once in the door, the strength in leadership assists new people in feeling that the fund has a robust framework and sensible decision-making. This is what they need to do their job well, so persuading them at the interview stage and being convincing when they’ve started at the company cements their impression that they’ve made the decision.
It turns out that leadership is important when running a hedge fund. Funds are not run in isolation; it takes organized teamwork to manage a complex hedge fund and not miss any steps along the way.