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http://www.fwallstreet.com/article/170-how-to-start-your-own-...
What does it take to start a hedge fund? The scary truth is that virtually anyone can start a
hedge fund; and, it can be fairly inexpensive and easy to do. Why is this so scary? Among
other reasons, hedge funds can attract investors while providing very little information; so,
investors may not be able to make well-informed decisions. Then, hedge funds dont need to
provide regular (or audited) information on an ongoing basis. If your manager is a crackpot
and you have to stay invested for the remainder of the year (or quarter or whatever), you
could wind up with very severe losses.
(Prospective investors should choose very carefully.)
Of coursethat wont stop me from telling you how to set up a hedge fund. After all, I get a
kick out of divulging Wall Streets billion dollar secrets for free.
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How To Start Your Own Hedge Fund | Joe Ponzio's F Wall Street
http://www.fwallstreet.com/article/170-how-to-start-your-own-...
Youll need to get a tax id (FEIN) number from the IRS. Simple enough go to the IRS
website and get it online in a matter of minutes. Its fast, easy, and free.
Running Total: Still $150.00
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How To Start Your Own Hedge Fund | Joe Ponzio's F Wall Street
http://www.fwallstreet.com/article/170-how-to-start-your-own-...
create an investment advisory company to shield yourself from personal liability (eg., Joe
Ponzio Funds, Inc.)?
To be safe, you create a corporation (or LLC, whatever) to act as general partner of your LP.
(Your investors will be the limited partners). Youre cheap; so, you create your Illinois
corporation for $175 instead of expediting for $300. Once incorporated, youll get a FEIN for
your company as well.
Thus, you will personally be the Investment Advisor Representative (IAR) of your company,
which will act as the Registered Investment Advisor (RIA).
Running Total: $445.00
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How To Start Your Own Hedge Fund | Joe Ponzio's F Wall Street
http://www.fwallstreet.com/article/170-how-to-start-your-own-...
started:
For Your Investment Advisory Firm:
By-laws
Compliance manual
Code of Ethics
Supervisory Procedures Manual
Investment Adviser/Portfolio Management Agreement
Everything else to run your business (website, business cards, etc.)
For Your Hedge Fund:
A LP agreement
Private Placement Memorandum
A presentation or brochure about your proposed investment style (needed for capital
raising and road shows)
A custodian/brokerage account to house the funds securities
along with checking accounts, etc.
If you are feeling really cheap, you can find a lot of this stuff online, and then tweak it for
your business; or, you can pay a compliance service to provide you with many of these
things.
OBVIOUSLY
Having gone through a lot of these steps over the years, its a lot easier for me to say than for
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How To Start Your Own Hedge Fund | Joe Ponzio's F Wall Street
http://www.fwallstreet.com/article/170-how-to-start-your-own-...
you to do. Though I spent a few months digging around in the dark to get my firm started, I
can now say that it is not all that difficult or expensive if I had to start over again.
As you can see that hedge funds are not as mysterious as Wall Street wants you to believe. In
the end, a hedge fund is a partnership not some special entity that has a general partner
(you or your investment firm) and limited partners (your investors).
Then again, dont mistake this article as advice or compliance help. This is a broad overview
of how to set up a basic hedge fund. The laws, rules, and regulations can change; so, make
sure you are up to speed based on your situation.
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