When you create a hedge fund, you are actually creating two businesses: the management business and the fund itself.

Writing a hedge fund business plan is also a bit different from writing a typical business plans.

There are many ways you can write a hedge fund business plan but all of them should include the following four components: vision, company overview, product strategy, and market analysis.

This article provides a general guideline for drafting each section. The guidelines, however, are not exhaustive. If you are writing a unified or merged business plan, please be careful of how much you disclose. Finally, it is important to consult a professional before finalizing your business plan.

Vision

• How many funds will the management company administer?
• Are there any plans to develop new products for investor?
• How will noninvestment-related services handled? Will they be outsourced?
• What are the factors that will contribute to the success of the business? For example, how dependent is the business on marketing vs. performance?
• Description of how each fund will be managed.
• Description of the different strategies used for each fund.
• What are the investment philosophies and strategies and how will this affect each fund?
• Discussion of expected leverage, turnover rate, characteristics.
• What are the benchmarks for each fund?

Company Overview

• Description of how the management and fund companies are structured.
• A list of owners and how profits will be allocated.
• Payments and expenses.
• How are the managers managed?
• What are the strategic alliances that the companies might have, if any?
• How will the management company be staffed?
• Where are the funds domiciled?
• Description of investment process for each fund and how this will impact results.
• Discussion of fee structure(s) and incentives.

Product Strategy

• Describe the products that the management company sells. In most cases, these products are investment management services.
• Describe in detail the investment strategy and philosophy for each fund.
• Discuss sources of risk and returns.
• What analytical tools are used?
• How is investment decisions made? Who makes them?
• Discuss past fund performance or hypothetical fund performance if these strategies are implemented.

Market Analysis

• Discuss the demand for the services provided by the hedge fund.
• Analyze relevant sector growth and trend.
• Discuss the potential size of the fund.
• Discuss market factors that would impact the fund.
• Discuss the recent experience of investors in the relevant sector.