The Importance of Focus when Starting a Hedge Fund

April 26, 2007 |

My partners and I get inquiries every week from people looking to start up a hedge fund. Some of these folks have good ideas and solid experience, yet we are always amazed at how many aspiring hedge fund managers are not able to articulate their strategy, coherently, in written form. This is especially true with folks who have a proprietary trading background. Many can certainly make money by trading (if their track records are to be believed), but they cannot seem to articulate a focused, concise strategy and/or business plan.

Aspiring hedge fund managers … remember this: investors are looking for a sound strategy that they can sink their teeth into. If you cannot articulate your trading strategy, you are going to have a hard time attracting investment capital. So, take the time to draft a good business plan that outlines your strategy and how you plan to execute against it. If I was an investor and a start up manager approached me about investing in his new fund without being able to explain the strategy simply and easily, I would never touch it. For one thing, it is an open invitation for style drift. Thanks, but no thanks.

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