This document provides a checklist for starting a hedge fund, outlining operational considerations such as developing an investment strategy, business plan, legal structure, and compliance program. It also discusses selecting service providers, setting up office infrastructure, and preparing necessary legal documents like offering materials and agreements with prime brokers. The goal is to ensure all regulatory requirements are met and the fund is properly structured and positioned for success from the beginning.
This document provides a checklist for starting a hedge fund, outlining operational considerations such as developing an investment strategy, business plan, legal structure, and compliance program. It also discusses selecting service providers, setting up office infrastructure, and preparing necessary legal documents like offering materials and agreements with prime brokers. The goal is to ensure all regulatory requirements are met and the fund is properly structured and positioned for success from the beginning.
This document provides a checklist for starting a hedge fund, outlining operational considerations such as developing an investment strategy, business plan, legal structure, and compliance program. It also discusses selecting service providers, setting up office infrastructure, and preparing necessary legal documents like offering materials and agreements with prime brokers. The goal is to ensure all regulatory requirements are met and the fund is properly structured and positioned for success from the beginning.
This document provides a checklist for starting a hedge fund, outlining operational considerations such as developing an investment strategy, business plan, legal structure, and compliance program. It also discusses selecting service providers, setting up office infrastructure, and preparing necessary legal documents like offering materials and agreements with prime brokers. The goal is to ensure all regulatory requirements are met and the fund is properly structured and positioned for success from the beginning.
S TA R T- U P C H E C K L I S T M A R C U M A LT E R N AT I V E I NVE STM E NT G ROU P Hedge Fund Start-Up Checklist OPERATING CONSIDERATIONS n Select names for the operating entities and the fund(s): n Clarify your investment strategy and unique edge – n Fund Demonstrate your specific expertise and discuss the kinds n General partner of markets you will trade and invest in and the instruments n Managing member you will use to implement your strategy. n Investment manager n Global Macro Obtain tax ID #s and fund incorporation for foreign n Directional entities. n Event-driven n Relative Value (arbitrage) n Select members of the management team – Consider n Other forming an Advisory Board and Valuation Committee, and n Develop a strategic business plan: outsourcing the CFO and CCO positions. n Budget n Chief Executive Officer
n Cash flow projections – fixed vs. variable costs n Chief Operating Officer
n Evaluate which expenses should be paid by the n Chief Investment Officer
n Chief Financial Officer management company and which can be absorbed n Chief Compliance Officer by the fund n Timeline for execution n Others
n n Set-up shop: Prepare an executive summary and basic term sheet n Banking relationships – Include a description of basic terms n Strategy n Office space
n Management fee n Business equipment
n Incentive fee (allocation) n Trading accounts
n Minimum subscription amount n Staffing
n Redemption provisions n Website
n Technology n Select external consultants – Consider their experience n Other and reputation in the hedge fund industry and their ability n Human resources – Consider outsourcing to a to grow with the business and adapt to change. Weigh that against costs, the level of service you expect and the professional employer organization (PEO) that will handle importance of your business to the provider. everything from payroll to benefits to retirement plans. n Attorney n Staffing
n Prime broker/custodian n Compensation
n Independent accountant n Health benefits
n Fund administrator n Profit sharing
n Regulatory consultant n Retirement plans
n Independent valuation consultant
n IT Support: n Independent directors n Network and computer systems n Information Technology (IT) consultant and support n Disaster recovery plans n 3rd party marketers/fundraisers n Cybersecurity n The Cloud
n Purchase adequate insurance – Business, life,
health and cybersecurity n Select front-end trading and accounting systems – Leverage prime broker and fund administrator, and research subscriptions and services
www.marcumllp.com STRUCTURE n Establish compliance, risk and valuation guidelines – Document the process, review by a valuation committee n Specify structure and type of investment entity. and approve on a regular basis. Consider: n Type of investments n Valuation Policy must be in accordance with n Type of trading activity generally accepted accounting principles (GAAP) n Type and number of investors n Market valuation approach: n Broker quotes Weigh your options: n Hedge vs. private equity vs hybrid n Comparable public securities
n LP vs. LLC n Recent transactions
n 3(c)-1 or 3(c)-7 n Market multiples and EBITDA
calculations n Determine legal entity, structure and n Income approach: appropriate jurisdiction: n Future/ discounted cash flows n Onshore n Capitalization rates n Offshore n Parallel n Master-feeder vehicles DOCUMENT REVIEW n Evaluate registration options and costs to assure n Prepare and review with appropriate parties: compliance – Register as a Registered Investment n Articles of Association Adviser (RIA); develop compliance program and manual. n Offering Memorandum n Blue sky laws n Subscription Agreement n Potential regulatory changes n Partnership Agreement
n n Investment Management Agreement
Determine the provisions to be included in your n Due Diligence Questionnaire offering documents: n Capital transactions n Compliance and Risk Guidelines and Manuals
n Subscriptions n Prime Brokerage Agreements
n Redemptions n ISDA Agreements
n Lock-up periods/gates/suspensions n Custody Agreements
n Allocation of profits and losses n Counterparty Risk Agreements
n Incentive allocation or fee n Valuation Policy
n High-water marks, loss carry-forwards, hurdle rates n Marketing and Website Materials n Code of Ethics and claw-back clauses n Side pockets n Form ADV
n New issues n Management fee Since its founding in 2000, Marcum LLP’s Alternative n Portfolio valuation Investment Group has developed from a niche service center into a national practice with a presence in each of the Firm’s n Determine year-end tax reporting needs: major markets. The group's expertise includes auditing, fund n Aggregate vs. layering approaches for structuring, financial reporting, accounting services, tax maintaining records planning, tax return preparation and consulting for funds of n Trader vs. investor all sizes, structures, strategies and domiciles. In addition to n Section 475 election traditional long/short equity funds and commodity pools, the group has in-depth knowledge of complex and hard to value financial products, including PIPEs, life settlements, derivatives, and credit-linked instruments. For more information, visit www.marcumllp.com.
www.marcumllp.com Marcum Group is a family of organizations providing a comprehensive range of professional services including accounting and advisory, technology solutions, wealth management, and executive and professional recruiting.
