Starting an investment fund possibility
Hi all - thanks for taking a moment to read.
To keep it brief, I wanted to ask everyone here if they have thought about / attempted to start an investment fund upon graduation. My reasoning being that it doesn't seem that complex to actually run the fund having worked at one during the summer. The main obstacle appears to be fundraising but with the obscene amount of capital flowing around, is it not reasonable to assume one could raise £1m GBP as a first vintage?
Keeping it ambiguous as this is just a first thought.
Would appreciate any feedback / advice.
Thanks for reading!
Comments (7)
Are you talking about a hedge fund or private equity fund? Even raising 1mn for yourHFwill be much harder than you think regardless if "money is flowing"... there are tons of pedigreed PMs fromMMswho struggle to raise money for their 100mn launch, and I doubt a recent grad with no track record will win an allocation over other launches.
On thePEside, it's not my expertise so others can comment, but I imagine you will face the same issues. 1mn for a fund doesn't really give you a lot of options on deals to go for. Where will your deal flow come from? ultra lower marketPEis a tough space to crack, and requires a lot more leg work than the deals you see even in normallower middle market. usually these are businesses with lots of operational issues run by families and it takes a lot of work to get them on track/ turned around vs. your typical deal (which honestly these days has pretty much been buy at a low multiple sell at a higher multiple - but that is over).
This isn't to discourage you, but there are a lot of posts out there from people "considering launching their own fund" recently (I just responded to another one recently). It may look easy and simple (and maybe 30+ years ago it was), but it is anything but. The playing field has changed and is much more institutionalized and competitive. There are very specific reasons why, and it would foolish to ignore the challenges in starting an investment firm today. Running a WM practice or RIA is one thing, but running an alternatives shop is extremely difficult. The first thing you should question is "why do I deserve to be in business over others - what am I bringing to the table that investors cannot currently get somewhere else - why are my returns / asset class exposure unique or superior to other firms?" Try to answer that as step 1
I think I am uniquely qualified to respond as I have done this....
Raising money as a first time manager is VERY hard. You need a (audited) track record.
You will underestimate the costs of setting up ahedge fundstructure, I think it cost me close to USD600k over the course of a year.
The list goes on......
Do you have any track record in running external money at all? (your robinhood acct doesnt count)
Cba to type, but if you have specific questions hit me in DM. I raised $20+ as a first time fund and it took 4 years, and eventually collapsed. I am now inIB.
This is going to be very difficult to do, I also don't know where you get this idea that there is all this money flowing around, have you looked at markets recently? For individuals, it has never been easier to invest inindex funds, robo advisors, etc. For institutions, there is no way they are handing over money to a newly graduated kid with no track record. And no one is handing a newbie money in this environment.
I also don't know where you get the idea that running a fund is easy. Running a robinhood account is easy. Setting up compliance, legal, the right fund structure, proper agreements with brokers, etc is not easy.
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Thanks for keeping it ambiguous OP, wouldn't want anyone cutting you out
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