You want to start a hedge fund. You’ve got a clear plan on what kind of assets you want to invest in, and what investment strategy you will use for your fund. Then you find yourself wondering how on earth to set up that fund. In this article we will try to shine some light on which service providers you'll need
In addition to the traders that you’ll employ and the fund managers overseeing the entire portfolio, you will have to appoint service providers to help your fund thrive.
Other third-party service providers, which are not required but may be used by new hedge funds, are listed below.
An outside/part-time CFO may be hired to advise on finance-related matter, as startup funds may not want to retain a full-time CFO given budgetary constraints. CFOs work with the auditor and administrator to prepare financial statements, oversee cash flow, budgeting & financial planning requirements, manage third-party service providers and provide in-house tax and compliance-related advice.
Hedge Fund Consultants
A third-party hedge fund consultancy may be used to provide marketing services and investor relations. Functions include preparing investor documentation, responding to investor queries and designing marketing material.
Risk & Compliance
An outside compliance firm may be used to advise on compliance-related matters, draft internal AML/KYC policies, procedures and controls, develop appropriate employee training and review existing AML/KYC processes, examine risk-related procedures and methodologies used in the hedge fund.
Tax advisors may be retained alongside outside counsel to advise on the suitability of fund structures (in relation to the jurisdiction that the fund operates in and sells to), tax compliance matters and on individual tax-related cases.
Technology & Operations Consultants
Capital markets consulting firms may be used by startup hedge funds to set up both the physical and digital infrastructure for the hedge fund. Consultants may help integrate technology with data feed suppliers and other third-party software platforms, set up and manage document management solutions and design and maintain hedge fund’s public-facing & investor-facing website. SLAs (Service-level agreements) will be agreed with the consultancy.
Technology Vendors & Research Boutiques
Hedge funds may need to secure agreements with data providers, trading terminals (such as the Bloomberg Terminal), news platforms and research boutiques, to ensure that the hedge fund analysts are well equipped for their role.
Hedge funds may outsource the HR and recruitment functions to one or more HR specialists. The role of HR specialists range from sourcing new candidates and graduate recruitment to managing internal training programmes, liaising with the CFO and the Finance department for employee pensions and handling employee disputes.