Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

‘Hedge Fund 3.0’: Five Steps to Get in on the Action


So you want to start a hedge fund?

After a year in which most fund managers got bludgeoned by the high-correlation risk-off market, there’s still a clamor on Wall Street for anyone wishing to step off the curb and the safety of long-short funds and into the rush-hour traffic of the hedge world.

Citigroup , in fact, is out Monday with a 31-page how-to guide for startups, listing five essential steps you’ll need to follow to get up and running.

The firm’s Prime Finance Business Advisory Services sets out the strategy with some encouraging words about the new hedgie realm.

“The Citi Prime Finance Hedge Fund Start-Up Guide is being published at a time we believe represents a new inflection point in the evolution of the industry and the emergence of a new model for managing a hedge fund,” the report states.

“In our view, the infrastructure and software choices enjoyed by a manager in today’s environment deliver a ‘virtual set’ of services and products that we are describing internally and to our clients as ‘Hedge Fund 3.0.’”

The report covers:

1) Structure and control, from the most basic details of picking a name to dealing with tax issues and compliance.

2) Infrastructure, including real estate, computer system setup, build-out and integration testing.

3) Service providers, in terms of brokers to choose, administration and operation, documentation and on-boarding, which covers, among other things, reporting and daily process review.

4) Organization, which includes flow charts and division of duties.

5) Marketing, such as strategy and selling the fund to investors.

So maybe it looks easier than it sounds.

In any event, Citi is going full-court to try to enable start-ups and, of course, provide pricey advisory services to those who take the plunge.

“We have designed our Business Advisory services around a Hedge Fund Maturity Model that identifies how firms change over time as their AUM (assets under management) grows and their global reach expands,” the guide says.

“Just as we helped you navigate the challenges of this start-up phase, we have industry insights, key industry benchmarks, and practical hedge fund templates that will help you remain at the forefront of your peers.”

Sounds easy enough.

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