If you want to start a hedge fund, you might realize that the hedge fund business model is different from typical businesses.
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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.
- 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?
- 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.
- 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.
- 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.