So You Want to Start a Hedge Fund

TED SEIDES is the former President and co-CIO at Protégé Partners, LLC, a leading alternative investment firm launched in 2002 that invests in small and specialized hedge funds on an arms-length and seed basis. He has authored investment pieces for CFA Institute Conference Proceedings Quarterly, Institutional Investor, Harvard Business School Publishing, FT Alphaville, and the late Peter L. Bernstein's "Economics and Portfolio Strategy" newsletter.

Helpful, Accessible Guidance for Budding Hedge FundsSo You Want to Start a Hedge Fund provides critical lessons and thoughtful insights to those trying to decipher the industry, as well as those seeking to invest in the next generation of high performers. This book foregoes the sensational, headline-grabbing stories about the few billionaire hedge fund managers to reach the top of the field. Instead, it focuses on the much more common travails of start-ups and small investment firms. The successes and failures of a talented group of competitive managers--all highly educated and well trained--show what it takes for managers and allocators to succeed. These accounts include lessons on funding, team development, strategy, performance, and allocation.The hedge fund industry is concentrated in the largest funds, and the big funds are getting bigger. In time, some of these funds will not survive their founders and large sums will get reallocated to a broader selection of different managers. This practical guide outlines the allocation process for fledgling funds, and demonstrates how allocators can avoid pitfalls in their investments. So You Want to Start a Hedge Fund also shows how to:* Develop a sound strategy and raise the money you need* Gain a real-world perspective about how allocators think and act* Structure your team and investment process for success* Recognize the patterns of successful start-upsThe industry is approaching a significant crossroads. Aggregate growth is slowing and competition is shifting away from industry-wide growth, at the expense of traditional asset classes, to market share capture within the industry. So You Want to Start a Hedge Fund provides guidance for the little funds--the potential future leaders of the industry.

Foreword xiAcknowledgments xvIntroduction xix1 The Lessons 1Lessons for Managers 2Lessons for Allocators 42 So You Want to Start a Hedge Fund? 73 Attracting Capital 11Signals of Success 12A Classic Chicken-and-Egg Problem 30Investment Funds are Sold, Not Bought (Just Don't Tell the Buyers) 43Leveraging the Buzz 49Riding the Wave 55Building a Great Business 604 Team 65Your Single Best Investment 66The Best a Man Can Get 73The Two-Headed Portfolio Manager Monster 76Where Do Nice Guys Finish? 83Turnover: Don't Knock It Till You Try It 86Pacing Growth 915 Investment Strategy 97Finding True North 97Best Foot Forward, With Both Feet 100The Tug of War between Flexibility and Style Drift 106Stick to Your Knitting 117Building Blocks of Process 1236 Investment Performance 129A Slave to Monthly Numbers 130Sustaining Performance 134Reaching for Return 138The Role of Luck 144The Best Month in a Manager's Career 1507 So You Want to Invest in a Start-Up Hedge Fund? 153Influencing Outcomes 154Terms 158Preparing for Bumps in the Road 164Heed the Stop Sign 167Crossing the Velvet Rope 173Making Decisions 1778 Parting Thoughts 183Author's Disclaimer 189About the Author 193Notes 197Index 205