Advice on turn-key solutions for hedge fund onshore US (and offshore)

TSWP · Post by **TSWP** » Fri Aug 07, 2015 11:14 am

Gentlemen,

sorry if I am always abusing your generous knowledge-sharing attitude, I hope to be able to offer better contribution to the phorum in the future.

As some of you may know I am in the process of trying to launch my first start-up hedge fund and I have been asked, if I was going to get 2-3M USD as seed capital from some american investors, how would I structure the whole thing.

The clients putting the money in this case would be americans with onshore money, so an offshore solution would only work as long as it has an onshore feeder.

I exclude "managed accounts" solutions as I have been an investment advisor to a number of people that may be wanting to invest in this fund later, so it's better to go immediately for the HF route and build a track record so that in 2-3 years from now we can raise more capital.

I have browsed countless sites that offer turn-key solutions for hedge funds, and spoke to a few of them on the phone or by email, still it remains hard for me to understand which one of them would be best.

Let me clarify this: I am obviously not asking you to do the selection job for me, but I wonder which part of these turn-key solutions provider you think may be usually the more sketchy, or in other words, based on your long term experience in this business, where do you think the devil in the details may be hiding? As these companies offering turn-key solutions are usually leveraging some "umbrella structure" white-labeled to each single sub-account/manager, I wonder were could they be cutting corners and where it would be worth probing them to see if they are seaworthy in that particular corner, to avoid nasty surprises later.

It could be in the accounting department, or legal aspects, or custodian accounts, or something related to leverage or trading, etc.

If any of you has some opinion to share on the above, I'd be greatly interested in hearing about it.

Thanks for your help.

HitmanH · Post by **HitmanH** » Fri Aug 07, 2015 12:10 pm

The broad, boring answer, is that for each platform / turn-key - the detail (and the devil part) is slightly different.

From my experiance - they all have their own edge / failures - and that is the problem.

Some - as you say will run some kind of a structure where they co-mingle, internalise - but somehow give you your own track record. Some problems there in the quality of track record - and contamination.

Some genuinely wiill give you own structure - but then rape you on infra, desk and other costs.

Some are on pretty think ice regulatory (more from their perspective than yours - in how they claim oversight...)

Sorry no definiatve answer - but they're all a little different...

TSWP · Post by **TSWP** » Fri Aug 07, 2015 12:13 pm

Thank you Hitman, this is already very good and informative.

This in particular freaked me out:

> Some problems there in the quality of track record - and contamination.

svisstack · Post by **svisstack** » Fri Aug 07, 2015 1:11 pm

I didn't setup or seen setup of HF, but setuped other business things in past.

Just registered LTD, accountant + lawyer in outsourcing + maybe some kind of code for trades reporting every month for them will not be enough better and cheaper?

Tradenator · Post by **Tradenator** » Fri Aug 07, 2015 1:14 pm

What instruments will you be holding?

TSWP · Post by **TSWP** » Sun Aug 09, 2015 12:15 pm

> What instruments will you be holding?

Futures (indices, commodities, bonds, anything electronic liquid and global)

FX Spot

Tradenator · Post by **Tradenator** » Sun Aug 09, 2015 6:39 pm

Sounds like you want a CTA platform rather than a "hedge fund" platform. Also, if you are soliciting US clients then you need to get to know and love the NFA and register as a proper CTA. This brings with it some pain and suffering in terms of regular filings and associated stupidity.

TSWP · Post by **TSWP** » Mon Aug 10, 2015 8:54 am

Tradenator, thanks for the advice but I have already discarded CTAs solutions years ago for a number of reasons related in part to the associated stupidities you mentioned, plus other limits.

A hedge fund is what I need to create, it is the only proper way to grow and expand the investment management business that I envision to do in the long term.

Tradenator · Post by **Tradenator** » Mon Aug 10, 2015 12:24 pm

You need credible legal advice on this. Without it, I think you are headed for trouble.

TSWP · Post by **TSWP** » Mon Aug 10, 2015 3:56 pm

>You need credible legal advice on this. Without it, I think you are headed for trouble.

Do you mean: I need credible legal advice to examine the turn-key solution offered by provider x or y, for example?