How to Start a Hedge Fund – and Why You Probably

Shouldn’t
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July 24, 2019

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by Brian DeChesare Comments (15)

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You can find plenty of articles about “how to start a hedge fund,” but they all tend to
make the same glaring mistakes:

1. They fail to explain that only very specific types of people even have a chance
of starting a hedge fund;
2. They fail to explain that “beating the S&P in your personal account” won’t be
taken seriously by anyone and that it is not at all sufficient for starting a
fund; and
3. They fail to disclose starting a hedge fund is probably a bad idea.

If you want to start a hedge fund, as of 2019, I’d say you’re somewhere in between “a bit
crazy” and “total reality distortion field.”

Not only has the industry performed poorly for the past decade, but fewer funds are
forming each year, and management and performance fees have been falling for a long
time.

So, here’s why it’s probably a bad idea – but how to do it anyway if you insist:

The Blunt Truth About Starting a Hedge Fund

You might have a personal trading account with $100K, $200K, or even $1-5 million+.

Your average annualized returns over the past 5 years were 15%, beating the S&P 500,
which only produced 9%.

As a result, you believe that you’re a good candidate to start a hedge fund.

Wrong!

First of all, high returns on small amounts of capital (i.e., millions of dollars or less) do
not mean that much.

Second, results from “personal accounts,” no matter the account size, are not taken
seriously.

Third, you need to be part of an existing team at a hedge fund, asset

management firm, or prop trading firm to have a good chance at starting a new
fund.

To start a true, institutional-quality hedge fund that uses the LP / GP (Limited Partner /
General Partner) structure and has large external investors, such as endowments,
pension funds, and funds of funds, you’ll need to raise hundreds of millions of USD.

The bare minimum to get noticed is $100 million, but realistically it’s more like $250
million+, and ideally more like $500 million – $1 billion.

2/20
You have no chance of accomplishing that unless you have deep connections to
potential Limited Partners and a great track record over many years at an existing
fund.

Yes, you could start with much less capital, or go through a hedge fund incubator, or use
a “friends and family” approach, or target only high-net-worth individuals.

But if you start with, say, $5 million, you will not have enough to pay yourself anything,
hire others, or even cover administrative costs.

It will also be extremely tough to re-invest, grow, and attract new investors with that
amount of capital.

For more on the economics of hedge funds, please see the hedge fund overview and
hedge fund career path articles.

Not only has the industry has performed poorly ever since the 2008-2009 financial
crisis, but compliance and legal costs have increased substantially, the traditional “2
and 20” fee structure is now much lower, and strategies such as global macro and
long/short equity have fared poorly.

There are some bright spots, such as quant funds, but they’re a few specks of light in a
bloody field of corpses and rubble.

But if you believe that “ignorance is bliss,” and you have a solid track record and team at
an established firm, here are the steps to start a hedge fund:

How to Start a Hedge Fund, Part 1: Raising Capital

First, note that even if you do have a solid track record at an established firm, you may
not be able to use your results for marketing purposes.

You need to review your employment agreement and see what it allows because firms
have different policies.

Also, even if you can use these results for marketing purposes, you won’t necessarily
have 100% ownership of the results since you were in a team.

As a result, the “new fund marketing process” is often more about your process, your
story, and you as a person than it is about historical results.

Potential investors in your new fund, such as funds of funds, endowments, pensions,
family offices, and high-net-worth individuals, want to see three characteristics in your
investment process and story:

Specific – You need to do much better than “find and invest in undervalued
companies.”

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 Repeatable – Your strategy can’t be dependent on specific economic conditions
or government policies or a key individual.
Understandable – Institutional investors want strategies they understand 100%
rather than potentially-higher-return-but-complex-and-unclear strategies.

Good Pitches vs. Bad Pitches

To make this concrete, let’s look at two quick examples.

A “bad pitch” would go something like this:

Story: New healthcare regulations have created undervalued medical device

companies and overvalued health insurance companies. The market hasn’t yet
priced in the impact of these regulations, which has created investment and M&A
opportunities.
Process: You’ll focus on specific geographies and verticals and pore through
companies’ filings, call suppliers and medical professionals, do patient interviews,
and complete fundamental analysis to find the best long and short candidates.
Returns: You’ve been using this strategy for 2 years in your personal account of
$100K, and you’ve averaged 20% returns each year, verified by a Big 4 audit.

This strategy might seem reasonable, but there are several problems.

First, it’s far too dependent on current government policies – what if

something changes, or the regulation gets rolled back?

Second, the process is not scalable because it’s extremely labor-intensive.

Finally, your track record is linked to your personal account, and strategies that work
with $100K might not work so well with $100 million (oh, and 2 years of results might
not be enough – 3-5 is better).

A better pitch might go like this:

Story: You’ve identified 15 key signals in “mergers of equals” scenarios that

correlate strongly with the probability of the M&A deal going through. The market
has continuously mispriced companies’ stock prices in these situations, creating
opportunities to earn market returns but with significantly less risk.
Process: You track M&A activity in a sector and apply these rules of thumb about
the exchange ratio, stock price volatility, and others, and then you confirm your
findings with a review of corporate filings and additional due diligence.
Returns: Working in a team of 3 with $20 million in capital at a generalist hedge
fund over the past 5 years, you’ve averaged 11% annual returns, always in a
relatively narrow band from 8% to 15% in any given year.

This strategy is specific, not tied to a fad or trend, and the process is more repeatable
and scalable.
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It’s also less dependent on you, and your returns have been more consistent with a
much larger amount of capital over several years.

In addition to honing your pitch, you need to be personable because institutional

investors often place just as much weight in your character as they do in your strategies
and returns.

The Capital Raising Process from Beginning to End

Once you’ve refined your pitch, the process of raising capital differs depending on the
types of investors you target.

For example, if you pitch to a $10 billion endowment that only invests in funds with
over $500 million AUM, it will be slower and more bureaucratic than pitching to a
small family office.

With large institutional investors, you can expect the following:

Introduction – Get an introduction via other fund managers, trustees, your

prime brokerage provider, or anyone else you know.
Phone Interview – Answer questions about your strategy, how you make
decisions, and qualitative aspects of your fund.
Informal Background Check – They’ll ask about you in the community to
figure out your reputation. “No search results” can be worse than negative
findings!
In-Person Pitch Day – If they like your story and reputation, they’ll invite you
in to present for an entire day. You’ll go through your slides, your story, your
process, your risk management, your team, your performance, and more.

When you’re presenting your past investments, you might use a structure like the
following for each one:

The Idea: “This healthcare company was undervalued because one division was
dragging down earnings, and we thought there was a significant chance of a
divestiture because of new competitors entering the market and increased pricing
pressure, so we invested and expected to realize a gain within 12 months.”
How You Developed the Idea: You witnessed a similar event in a different
industry, and then realized that undervalued companies with underperforming
divisions might exist elsewhere – and that certain industries were more likely to
come under pricing pressure than others.
The Work You Did on the Idea: You went back 5 years and analyzed the
financials, valuation multiples, and market conditions of all similar cases; based
on that, you found 10 rules of thumb you could use to identify cases where there
was an 80% likelihood of a company’s stock price appreciating upon
announcement of a divestiture.

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 The Result: You invested in the company, and, as expected, it announced a
divestiture within the next 12 months. However, its stock price rose by only 5%
rather than the 10-15% that your analysis had predicted, and you sold off your
position for a modest gain.
How You Applied the Results and What You Learned: Your thinking was
not entirely wrong, but you had underestimated the impact of new regulations in
the sector, which accounted for the difference. As a result, the company’s earnings
growth was dampened, and the divestiture resulted in less uplift than you
expected. You decided to focus on sectors with lighter regulations, such as [Name
Examples].

The #1 mistake in day-long presentations is focusing too much on your successes

and not enough on your mistakes.

You might be tempted to walk in and give them 10 case studies of investments where
you earned 50%, 70%, or 100% within 12 months.

But no investor is perfect, and everyone loses money sometimes.

If you want a higher chance of closing the deal, throw in a few stories about mistakes
and what you learned from them as well.

After you present, you might have to wait up to a year to receive a definitive “yes/no”
answer.

You might also have to pitch to different groups, and they might visit your office and
speak with other team members.

If all of that goes well, they might submit a proposal on your fund to the ultimate
decision-makers, such as the Board of Trustees for an endowment, and then you’ll have
to come in and deliver the “final pitch” to them.

Other Process Points

The process is quicker if you focus on smaller family offices and HNW individuals – you
might get an introduction, speak on the phone, and then visit in-person for a day or two
to answer more questions and complete the paperwork.

But it will also take more meetings and individual investors to reach a critical mass of
capital if you do it that way, so there is a clear trade-off.

However, if you have less than $100 million in AUM, you pretty much have to start with
these smaller offices and individuals because large institutions have a minimum check
size and concentration limits (i.e., they don’t want to be 40% of AUM in a $75 million
fund).

The success rate with investor meetings of all types is very low unless you have a great
reputation at a top firm and you’re starting a new one with the same team.
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You might have to contact hundreds of LPs before you start to see success, so the odds
are much worse than those in investment banking networking.

Also, endowments and pension funds are extremely conservative and almost always
avoid brand-new funds unless they already know the manager(s).

Consultants (i.e., placement agents) play a big role in the fundraising process as well,
but there is a “size bias” there, and it’s tough to get their attention if you’re under a few
hundred million AUM.

If you manage to raise enough capital to get started, you’ll then have to send out
monthly or quarterly updates and an annual letter to your LPs.

Investors will also call you randomly to ask how things are going or to explain the
strategies you’re currently using.

Large firms will scrutinize you closely, often devoting entire departments to fund
monitoring, while HNW individuals and small family offices will be more hands-off.

Having skin in the game is quite important, and many investors won’t commit
unless you also put a significant portion of your net worth into the fund.

So, the “capital raising process” is also about putting your own capital into play.

How to Start a Hedge Fund, Part 2: Setting Up the Paperwork and

Legal/Corporate Structure
So, let’s say you’ve been meeting with investors, you’ve presented a solid pitch, and
you’ve managed to win commitments for $100 million in AUM.

You need to think about logistical issues next.

You’ll have to tackle some of these issues before you even raise capital – but we’re
labeling it as “Part 2” here because without capital, nothing else happens.

First, you’ll need office space, which is expensive in places like in NY and London.

To save money, you can start from your home at first, use a “hedge fund hotel,” or share
space with other managers.

Until your management fees are enough to cover office rent and your other
administrative expenses, frugality is the name of the game.

You’ll also need service providers, such as lawyers, auditors, administrators,

marketers, prime brokers, compliance officers, and IT.

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You might be tempted to save money by using cheaper, lower-quality providers, but
that would be a big mistake because incorrect legal or compliance procedures could kill
your fund.

Also, potential investors will look at the quality of these providers to judge your fund.

The legal requirements to start a hedge fund vary widely by state and country, so we’re
not going to attempt to address them here.

At a high level, nearly all hedge funds are structured as Limited Partnerships
because of the LP and GP split in the hedge fund structure.

A good attorney should be your first call when starting a hedge fund, and your
investment agreement should include these terms at the bare minimum:

Fee Structure: As a new fund, you’ll most likely have to settle for lower
management fees (~1%) and performance fees (under 20%). The industry-wide
trend is toward lower fees, with more weight given to performance fees.
Lockup Term: This is the length of time that investors’ money has to remain in
the fund before it can be withdrawn, and it should match your strategy (e.g.,
longer for an activist fund that acquires large stakes in companies, but shorter for
a global macro fund with high liquidity).
Redemption Terms: How much notice do investors need to give when they
want to take their money out?
Performance Targets: Are you trying to outperform a particular index? Is
there a rate of return you have to beat before collecting performance fees? Is it
based on the fund’s “high water mark” NAV instead?

You may have to register as an investment adviser and complete a literal ton of other
paperwork and licensing, depending on where you set up.

Altogether, you can expect to spend tens of thousands of dollars, up to the

hundreds of thousands, just for the legal fees.

Beyond lawyers, you’ll need auditors to monitor your performance, administrators to

handle trade reconciliations and allocations, marketers to find more investors, prime
brokers to manage the brokers and dealers you trade through, and compliance staff to
manage reporting requirements.

IT costs vary based on your fund type – expect higher costs for quant funds and ones
using algorithmic trading, and lower costs for fundamental-oriented ones.

The bottom line is that because of all these expenses, you will not earn much for the
first few years of your fund.

Until your AUM grows enough for management fees to cover overhead with some
breathing room, you will be in “frugality mode.”
8/20
Supplemental income sources and high savings are highly recommended because it
could take years to reach the AUM required for long-term success.

How to Start a Hedge Fund, Part 3: Hiring a Team

So, let’s say you’ve made it through everything above, you’ve set up your fund, and you
have around $100 million in AUM.

Now you need to think about your team because even with external service providers,
you can’t do everything by yourself.

We label this “Part 3,” but you’ll have to build your team from the start because you’ll
get questions about it in your pitches.

And you don’t even have a great shot of starting a fund unless you have an existing team
that has worked together for years.

First, note that $100 million in AUM is barely enough to support a “team”: you might
earn $1.0 – $1.5 million in management fees from that, and infrastructure, overhead,
and compliance expenses will eat up a good portion of those fees.

You might have a few investment professionals at that level, a few support staff, and
many outsourced service providers.

Once you move closer to $1 billion in AUM, you might hire several more investment
professionals, a few more support staff, and even more outsourced services.

Quant funds have more IT needs and tend to have bigger teams, but many value-
oriented funds start with just the Founder, one person on the investing side, and
someone else in support.

If you only have the funds to hire one person, make it someone on the
administrative/operational/marketing side.

That may sound crazy, but you will spend an unbelievable amount of time on non-
investment-related tasks, such as talking to lawyers and accountants, reviewing legal
documents, and answering questions from potential investors.

Without someone else to handle these tasks, you might spend 50% or more of your
time on them, which limits your ability to create and implement investment strategies.

Hedge Fund Hiring: What Qualities Do New Hires Need?

But let’s say that you have grown your AUM, and now you can afford to hire more full-
timers and interns.

You might be tempted to read our hedge fund recruiting article and then ask candidates
to complete case studies, stock pitches, or other modeling/technical tests…
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…but at a startup hedge fund, that’s the wrong approach.

Yes, investment staff need to understand all of that, but the most important quality
is that they MUST be willing to get any task done no matter how random or
ridiculous it is.

Having a degree from Harvard or Oxford or 3 years of experience at Goldman Sachs are
extremely poor indicators of this quality – in fact, they’re often negative
indicators!

Your best bet is to tap your network and reach out to co-workers from previous jobs,
and if you need to go beyond that, start asking those co-workers for referrals.

As your fund grows beyond the “startup” phase, the hiring process will become more
traditional, with decisions based more heavily on discussions of investment ideas.

As your AUM grows, your headcount won’t necessarily grow linearly with it, especially if
you’re running a quant fund; there are multi-billion-dollar funds with only a few
investment staff.

Your headcount is more likely to scale up linearly if you’re running a value-oriented

fund that requires more people for research and due diligence.

As you grow, the non-investment headcount might increase more rapidly because your
compliance and reporting requirements will increase – but you won’t necessarily need
to come up with more investment ideas.

Many large hedge funds have a 1:1 ratio of investment personnel to non-investment
personnel, and sometimes it’s closer to 1:2.

How to Start a Hedge Fund, Part 4: Surviving the Job and a Day
in the Life
Despite all these obstacles, you’ve managed to raise capital for your fund, hire a small
team, and start investing.

Your average day will be quite chaotic because you will be doing much
more than investing – you will be managing an entire business.

Here’s what you might expect if you start a small value-oriented fund:

6 AM – 7 AM: Wake up, get ready, check email, and head into the office while reading
the news or listening to a podcast.

7 AM – 9:30 AM: Arrive at the office, read news about your current positions, and call
your prime broker to sell one of your positions that’s vulnerable to a big overnight move
in the GBP/EUR exchange rate.

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Then, you meet the team, listen to everyone pitch new ideas, and decide to look at some
declining companies with underfunded pensions as potential Short candidates.

9:30 AM – 11 AM: U.S. markets open, things are stable, and you spend a few hours
reading through a merger agreement for a newly announced M&A deal involving one of
your Longs.

11 AM – 12 PM: A trader stops in to tell you that one of your companies has been
penalized by the EPA and is awaiting news of the exact fine. You scramble to figure out
how bad it might be, but the company has more than enough cash to pay the highest
possible fine.

12 PM – 1 PM: Go back to reading the merger agreement while eating at your desk.

1 PM – 2 PM: Do a call with a potential investor and answer questions about your
fund’s strategy, risk management, and ability to take in new money.

2 PM – 4 PM: The stock of the company penalized by the EPA is down 15%, and now
it’s also under investigation by the Department of Justice.

You pull the team together to start looking through old EPA cases to get a sense of
expected vs. actual fines, and the stock falls another 5% while you’re doing this.

But you decide the market has overreacted, and you decide to buy more shares.

4 PM – 7 PM: U.S. markets close, so you round up everyone and go over research and
work tasks for the day and decide which names you’ll focus on for tomorrow.

Then, you go back to your desk and do some uninterrupted research for two hours,
focusing on SEC filings, court documents, and bankruptcy proceedings for a potential
distressed idea.

7 PM – 9 PM: Go to a dinner party for new funds, hosted by a hedge fund service
provider.

Everyone seems to be doing poorly this quarter, and you wonder what percentage of
funds will die within the next 2-3 years (50%? 75%?).

9 PM – 11 PM: Go home, pay the bills for service providers, update the books, and
start outlining your quarterly investor letter.

You take 5 minutes to respond to non-work emails from friends and then go to sleep.

You may not be working the hours of an investment banking analyst, but you are still
going to have a bad-to-non-existent personal life when your fund is brand new.

The biggest difference is that there’s almost no “downtime,” and you are 100%
responsible for everything that happens.

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It is incredibly common for hedge fund managers to develop chronic illnesses,
including autoimmune and stress-related disorders.

You deal with the stress from making investment and hiring decisions, the market
moving against you, investors being upset with you, and keeping the lights.

Also, the job can become more stressful the more senior you are because you’ll
gain even more responsibilities outside of investing.

The bottom line is that you must get your personal life in order before starting a hedge
fund.

Significant outside commitments, dysfunctional relationships, a pending divorce, sick

parents, or a brother who always needs to be bailed out of jail will make you go insane.

How to Start a Hedge Fund, Part 5: Exit Opportunities If It

Doesn’t Work Out
So, you’ve raised capital, started your fund, hired a team, and had a few good years
without having a heart attack…

…but then investors sour on your strategy, or you have one bad year, or you have a
major disagreement with your Partners, and now you have to shut down or leave the
fund.

This outcome is very likely because around 80% of all new hedge funds fail – not
necessarily in the first year, but within the first few years before they can raise enough
AUM to survive.

If this happens, your options depend on why it failed.

For example, was it because of bad performance (i.e., you consistently underperformed
the S&P by 5% per year?), or was it because of business reasons such as a disagreement
with your Partners or not being able to raise enough capital?

If you failed because of bad performance, you’re unlikely to get a second chance .

The culture of investment funds is 100% different from the Silicon Valley tech culture,
where VCs can look past multiple failures and still fund your company if they think it
has even a small chance of succeeding.

In the investment industry, you only have one shot at establishing a track record that’s
100% yours and proving that you can run a fund successfully.

If your startup fund doesn’t perform well, you’ll most likely leave the finance industry
and do something else: go back to school, get into technology or join a fin-tech startup,
start or buy a traditional small business, or go into teaching or a completely different
career.
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This is why it’s a bad idea to start a hedge fund when you’re very young: if something
goes wrong, you’ve eliminated one career option.

If you had decent-to-good results, but your fund failed because of the “business side,” a
viable strategy in the past might have been to join another, larger fund using a similar
strategy.

For example, a small single-manager fund could have rolled up into a larger, multi-
manager fund.

But I use the past tense here because this strategy is increasingly difficult due to
the oversupply of failed hedge funds in the market.

It’s still possible, but it’s no longer quite as easy as interviewing at a few larger funds or
joining a mutual fund – especially with the rise of passive and automated investing.

Hedge funds and mutual funds everywhere are suffering from fee compression, so
hiring new employees with failed hedge funds on their track records is not a top
priority.

As a result, your exit opportunities might not be that much different than if your fund
failed due to poor returns.

Should You Ever Want to Start a Hedge Fund?

If you have a spectacular team, a great, repeatable, scalable strategy, and you
understand exactly what a startup hedge fund entails, sure, go ahead.

However, if you’re a smart, ambitious person who’s willing to put in long hours, there
are dozens of easier ways to become financially successful:

It’s never been easier to start an online business – and even if your team is all
remote, you can still achieve significant scale (e.g., Automattic). You can
potentially even reach the millions or tens of millions in revenue without raising
outside capital.
You could invest your own funds in a personal account or take the “family
office” approach and not make it a true hedge fund with outside investors.
You could invest in real estate and rent out properties long-term or flip them for
quick profits.
You could launch your own freelance consulting or coaching services and
eventually turn them into products or subscription services.
You could join a promising startup as an early employee and cash out if the
startup gets acquired or goes public.
Or you could take the tried-and-true route of joining an established bank, PE
firm, or hedge fund, and rising through the ranks from Hedge Fund Analyst to
Portfolio Manager.

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None of these offers guaranteed success, but the probability of success is much higher
than it is in starting a hedge fund.

The downsides of starting a hedge fund are so massive that they outweigh the potential
upside in ~95% of cases:

It’s extremely difficult to raise enough capital to scale and become institutional
quality.
Management and performance fees are falling.
You are not just investing, but also running a business – and you may not even get
that much time to invest.
Most non-quant strategies have been out of favor.
If you fail, unlike with tech startups, there are no second chances.
Starting the fund will place an unbelievable amount of stress on your body and
personal life.
Oh, and since you must commit a significant portion of your net worth, you could
lose not just time and health, but also money.

In light of these points, you really have to ask yourself if it’s worth it.

My answer is a clear “no” – but if you feel like torturing yourself, enjoy the ride!

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About the Author
Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall
Street. In his spare time, he enjoys memorizing obscure Excel functions, editing
resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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Comments
Read below or Add a comment

1.
Kelly Lim
August 11, 2020
this was real informative and put across clearly for me. glad that you decided to
share your insights from your personal industry experience. :)

Reply
2.
Ant
January 21, 2020
Hi Brian, thank you for this great article and for clarifying things up. I appreciate
it very much.
These days I read a lot about hedge funds dying and how hard it is to start a new
one due to all the problems you have explained above.
A question arises though what is the next big thing for investment management?
Is it private equity considering its growth and funds inflow? Or is there some
other form of managing other’s people money that is on the rise?
What I’m trying to ask is, for an ambitious future investor who wants to manage
other people’s money, what investment structure has the most potential in the
next decade, what are the trends?

Thank you for all the great information you provide on this siti, have been
following your site for some time now and learnt a lot.

Reply
1.
M&I - Brian
January 22, 2020
Most people right now seem to think it’s private equity, but I don’t really
know. PE has been helped by very low interest rates and rising debt levels,
but those are unlikely to last forever, especially if inflation picks up or there’s
more political instability, populism, etc.

I would place an outside bet on crypto or something crypto-related

eventually disrupting existing investment management practices, but that
could take a very long time to develop.

Reply

16/20
3.
Sevi
November 1, 2019
Hi Brian,

Thanks for your detailed article. I have a question which isn’t related to starting a
hedge fund but started a firm that would verify the NAV of the hedge funds. This is
usually done by fund administrators but someone usually has to verify that.
Usually this would be a second administrator or an independent person. For
smaller start up hedge funds, do you think there’s demand for this low cost
verification approach or do funds rather go to bigger firms for this particular
service?

Thanks

Reply
1.
M&I - Brian
November 4, 2019
I don’t know enough about that service to say with any certainty, but sure, it
sounds like there could be demand for it. But it might be difficult to figure
out who the end customer is and what they want. It’s the standard problem
in any B2B company where the users and buyers are often different.

Reply
4.
Buyside Hustle
September 11, 2019
Have known a few people who have worked at a successful hedge fund for 5 to 10
years and started out on their own by raising $20-$50MM initially.

Once they had a well developed process, they were able to communicate to
investors their strategies and investment thesis’ going forward.

The key is to try to raise locked-up capital, private equity style vehicles so you do
not have to worry about redemptions. Set up the fund so it is structured with a
hurdle rate before the GP ever gets paid. You want to pay your investors first
before you ever receive a dime. That is the right way to do it these days.

Reply

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5.
Andrei A. Wogen
August 22, 2019
Hello! Thanks for the article! Really is a great and insightful article. For me
though, unlike you, after reading this article it has made me more driven o start
and run a hedge fund more than before. I was wondering though if you had any
advice on the “before the hedge fund years” i.e. college years. Is getting a degree
necessary? Including to not only start a fund down the road but to get my foot in
the door someplace to build connections and experience at existing funds. Thanks
again for the awesome article!

Reply
1.
M&I - Brian
August 23, 2019
You should start by winning internships that are related to hedge funds in
university. Yes, you need a degree or you don’t have much of a chance of
getting into anything in high finance. Start here:

https://www.mergersandinquisitions.com/how-to-get-a-job-at-a-hedge-
fund/

Reply
1.
Andrei A. Wogen
September 25, 2019
Thanks for the reply! Appretiate it greatly!

Reply
6.
KEG
August 8, 2019
Hi,

How would you recommend going about starting an online business? Would it be
something like selling on amazon, dropshipping or something different? I
currently work in IB and am constrained time-wise in starting a side venture.

Thanks

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M&I - Brian
August 9, 2019
To have long-term success, you’ll need your own product or service, even if
it’s something simple, because you don’t want to be at the mercy of some 3rd
party over commissions, supplies, terms/conditions, etc.

But to start with, I recommend something easier and less time-consuming,

such as coaching/freelancing, drop-shipping, or affiliate marketing
(promoting other peoples’ products and earning a commission).

Take a look at Ramit Sethi, Pat Flynn, Yaro Starak, etc. for various free
tutorials and paid courses/coaching on these topics. Not sure about drop-
shipping resources, as these people mostly focus on digital products and
services.

Reply
1.
KEG
August 9, 2019
Thanks for the reply. I already do some affiliate marketing (driving
paid traffic to landing pages for lead gen offers), though it has been
difficult to scale given high CPCs and time spent on crafting
banners/landers (also hard to float $10k+ on personal credit cards for
ad spend). Physical products would definitely see better economies of
scale – but I’m not sure where to source products.

Reply
1.
M&I - Brian
August 14, 2019
Yes, it’s difficult to scale affiliate marketing, and even if you do, it
may not be sustainable (I played around with it a bit in my early
days 10-12 years ago, but stopped when I realized the
downsides). But it’s still useful for learning the basics of online
marketing. I know almost nothing about physical products, but
I’ve seen friends have success with high-priced specialty/luxury
items like jewelry.

Reply

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 7.
Kristian
July 30, 2019
This was a great piece of advice. “If you have to ask for the price, it’s not for you”,
could be reiterated into “If you have to ask how to do it, you shouldn’t”. The
people who actually have a chance of starting a proper hedgefund do not have to
ask how to do it as they already have the knowledge and resources available to get
it done.

Reply
1.
M&I - Brian
July 30, 2019
I agree with you, but there’s still a lot of content on sites like Investopedia
that makes it seem like anyone can start a hedge fund just by registering for
an LLC. Part of the mission of this site is to cut through the junk and give
people a sense of whether or not certain certain career goals are realistic,
which means explaining why other sources are wrong or misleading.

Reply

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