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By Opalesque for New Managers: TrussEdge has published How to Launch a Hedge Fund, a white paper written with RFA, Opus Fund Services and Dechert. It aims to help emerging managers handle the practical, operational, technological and regulatory challenges of setting up a fund, from pre-launch planning and structuring to cybersecurity, compliance and investor relations.
TrussEdge is a Chicago-based portfolio management system that helps funds with front to back solutions. RFA is a provider of IT, financial cloud and cybersecurity solutions, Opus Fund Services is a global fund administrator, and Dechert is an international law firm with extensive experience in investment funds.
The guide stresses that investment performance alone is not enough. Launching and sustaining a fund also requires robust infrastructure and an operating model that meets investor expectations. TrussEdge CEO Dave Shastri said managers must build a business investors can trust, with the right people, processes, technology and controls from day one, and that the guide is meant to help them avoid common early pitfalls.
It is organised into five sections:
• Before you launch: strategy, revenue models, fund structuring and terms, seed capital, target investors and service-provider selection.
• Building the right team: key start-up roles, outsourced COO and CFO functions, remote working and key-person risk.
• Managing operational risk: governance, risk management, cybersecurity, compliance, intellectual property, insurance and business continuity.
• Running the fund: IT support, cloud infrastructure, data management, compliance essentials, data security and service-provider integration.
• Investor relations: communications, capital raising priorities and performance reporting.
An appendix covers common data security and operational pitfalls, underlining the value of sound practices from the outset. A recurring theme is the growing importance of institutional-quality operations, as investor due diligence increasingly scrutinises a manager's operational framework.
Shastri added that technology and specialist outsourcing now let smaller firms access sophisticated capabilities without building every function in-house, provided they choose partners wisely and early.
The white paper targets prospective and emerging managers and those supporting fund launches. It can be downloaded from TrussEdge, which has worked with hedge funds since 1998.
Their new publication should be an update from the last Hedge-Fund-Launch papers that have sprung up over the years, including the guides by Bloomberg AIMA and the Capital Fund Law Group, which came out in 2018, a 2015 book published by Wiley Finance, and a white paper by NAV Fund Services.
More recently, law firms Simmons & Simmons launched a "Manager's guide to seed deals", Haynes Boone issued a UK hedge fund launch guide, and CohnReznick released an updated Emerging Fund Managers Resource Guide.
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