When working with emerging managers, at some point during the engagement, I aminevitably told "I really can't afford an attorney/accountant/compliance person/ [fill in the blank] yet. I'll just have to wait until I get an allocation of capital and start to get some revenue, first."

This is the Catch-22 for managers. They can't afford the help to get properly set up to receive an allocation, yet they can't get an allocation until they're properly set up.

Below are the harsh realities that emerging managers need to accept:

• Allocators won't give money to people they don't trust
• Allocators won't give money to you just because they like you
• The barrier to entry in the alternatives industry is high because of the ever evolving regulatory environment
• The regulatory environment has evolved because of the risks associated with trading AND running a trading business

I tell clients that, if they can't afford to spend at least $50,000/year for two years, with no revenues coming in, they need to rethink their business strategy. Being an emerging manager is not for wimps, because it is not all about the trading. It is equally about identifying and mitigating the associated business risks. Below are typical services that are minimally needed for a new manager:

Allocators look at all of these areas. At the end of the day, they give money to traders they trust. No allocator is looking at just one trader. Professionalism can help separate you from the crowd.

So what are your options if you believe you are a brilliant trader yet don't feel that you have the money that it takes to get properly organized to market to allocators?

CAPITAL SOURCING OPTIONS

1. Start with doing what you do best - be a trader. If your trading is that good, you can cut a......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.