Now that hedge funds can finally advertise, they have a lot to think about.
At the same time, the JOBS Act rules could make it easier for additional funds to be formed.
Before aspiring managers get started, there are a number of key things that they need to consider.
Ron Geffner, a partner at New York-based law firm Sadis & Goldberg, provided StreetID with five essential tips for starting a hedge fund.
“First and foremost, develop a real budget,” said Geffner, whose law firm represents more than 600 hedge fund managers worldwide.
Second, it is important to understand that a realistic budget “contemplates not only the costs of creating your business but possibly the lack of revenue the principal or sponsor may suffer from for an undetermined amount of time until the business becomes profitable,” Geffner added.
Third, don’t ignore the necessity of service providers.
“Part of that budget is engaging the proper service providers,” said Geffner. “We routinely encounter people who…engage counsel who lack the requisite skill sets and expertise.”
Fourth, managers (and entrepreneurs of any financial company, for that matter) should make sure that their product or service is good before it launches.
“After a manager has launched a product, it can be prohibitively expensive and embarrassing to correct the mistakes,” Geffner warned. “At worst, it can result in being fined, sanctioned or banned by one or more regulators.”
Last but not least, managers should work hard to perfect their business plans.
“Without the proper business plan…it reduces the likelihood of you attracting and sustaining an investment by the appropriate parties,” said Geffner.
What Comes Next?
Before the fund is ready to go, managers need to start thinking about marketing.
April Rudin, a financial services marketing strategist and digital media expert, has five tips for managers who are looking to get started:
1) “Who is their target market?” Rudin, the founder and President of The Rudin Group (a firm that specializes in building integrated marketing, branding and communications strategies for the financial services industry), questioned. “Having a target market of high net worth investors isn’t good enough anymore. They need to segment it.”
2) “They need to have a marketing budget.”
3) “They do need to have professional advice.” Rudin wouldn’t think of running her own portfolio, so why should hedge fund managers start their own marketing campaign without the help of a professional?
4) “They always want to be measuring, so their return on investment is really important there.”
5) Be flexible. When buying ad space, it might be better to pick a smaller, more targeted publication.
“It’s not about being big and sexy, it’s about being in the right places at the right time,” said Rudin.
Get Hired Now
These days, job seekers have a million options, but we know where they should turn: StreetID. We built StreetID (a financial career matchmaking website) from the ground up to accommodate Wall Street’s growing community of financial professionals. In good times and in bad, current job seekers and those looking to move on in the future can turn to StreetID and sign up for a free account and make a direct connection with relevant candidates and employers.