1 Introduction
I’m thinking about launching a fund. What do I need to do? To whom can I speak? Do I need a license? How much is it going to cost me? How quickly can I set it up?
These are all questions asked by thousands of new finance entrepreneurs every year. Unfortunately, getting the answers is never straightforward and this lack of knowledge discourages many from exploring further.
Launching a fund, similar to launching any other entrepreneurial business, is a very rewarding experience on a professional and personal level. The hedge fund industry, as well as the broader alternatives industry, is an important part of the global financial ecosystem and contributes to the economy in many ways, by providing liquidity and capital, creating employment and encouraging financial innovation.1
In many segments of the financial industry, entrepreneurship has become increasingly difficult. For example, it would be relatively difficult for two partners to team up to launch a new bank considering the heavy regulatory and capital requirements. However, launching a fund is not only a possible option, but one that is increasingly popular.
1.1 What Is the Purpose of This Book?
The goal of this book is to empower the broader financial community so that if an ambitious fund manager wants to take the risk and launch his own fund, then he should have the basic tools and knowledge enabling him to do so, or at a minimum, understand the big picture in order to make a more informed decision.
This book sets out the various considerations to keep in mind when thinking about launching a fund. The knowledge that you will acquire in this book will enable you not only to have a better picture of what’s needed, but will also give you the tools and concepts that you need to understand as you prepare for your launch. It will also provide you with practical advice on how to successfully manage and grow the business.
1.2 Do I Need to Incorporate Everything That Is Set Out in This Book?
There is no perfect science in how to launch a fund. This book sets out many of the current industry best practices. Many may have launched very successful funds and not followed some or all of the recommendations in this book. However, we believe that if you are aware of the various components set out in this book, you will be empowered with the knowledge required and make the decisions that are best for your business.
1.3 What About Other Types of Asset Management Firms Like Long-Only Asset Managers, Private Equity, Venture Capital or Even Family Offices?
It’s important to note that whilst this book focuses mainly on the hedge fund industry, it’s generally applicable to anyone launching any type of traditional or alternative asset management firm or family office. Hedge funds tend to require some of the most sophisticated setups, thus the focus of this book, but the information provided here is applicable to any other type of fund with the required adaptation (Table 1.1).
Table 1.1
How does the book apply to other type of asset management firms?
Chapter and topic | Hedge funds | Long-only asset managers | PE/VC | Family offices |
|---|---|---|---|---|
Chapter 1: Introduction and Overview of the Asian Hedge Funds Industry | ✓ | |||
Chapter 2: Starting a Hedge Fund in Asia | ✓ | ✓ | ✓ | ✓ |
Chapter 3: A Hedge Fund Startup Timetable and Budget | ✓ | ✓ | ✓ | ✓ |
Chapter 4: Location: Where to Set Up Your Hedge Fund Business? | ✓ | ✓ | ✓ | ✓ |
Chapter 5: Regulatory Considerations: Do You Need a License? | ✓ | ✓ | ||
Chapter 6: Fund Structuring | ✓ | ✓ | ✓ | |
Chapter 7: Tax and Management Company Structuring | ✓ | ✓ | ✓ | |
Chapter 8: Governance | ✓ | ✓ | ✓ | |
Chapter 9: Fund Terms and Operational Due Diligence | ✓ | |||
Chapter 10: Capital Raising | ✓ | ✓ | ✓ | |
Chapter 11: Talent and Hiring | ✓ | ✓ | ✓ | ✓ |
Chapter 12: Office Space | ✓ | ✓ | ✓ | ✓ |
Chapter 13: Technology, Systems and Operations | ✓ | ✓ | ✓ | |
Chapter 14: Service Provider Selection, Onboarding and Growth | ✓ | ✓ | ✓ | ✓ |
1.4 Does This Book Only Apply to Funds Being Launched in Asia?
The focus of this book is on Asia, with a particular emphasis on Hong Kong and Singapore. If you’re planning to launch a fund out of Hong Kong or Singapore or looking at opening an office there, you’ll find this book very useful. If you’re planning on launching your fund out of Australia, Japan, Korea or Mainland China, all of the chapters will still be relevant but you’ll need to adapt them to the particularities of your jurisdiction. Writing a book that covers all Asian jurisdictions with the same level of depth would not be possible in the limits of a single book.
In addition, although the focus of this book is Asia, most of the topics discussed apply globally and are as applicable in New York or London as in Hong Kong and Singapore. For example, whilst some of the topics like regulatory or tax are very regional, others like capital raising and technology apply almost similarly globally.
1.5 How to Read This Book?
The chapters of this book are written in a general chronological order, but each chapter is written in a way that it can be read on its own as well.
If you’re considering launching a fund or want to learn more about the process, we recommend that you start from the beginning of the book and go through the chapters in order.
If you’re an established manager and just want to refresh your knowledge on a certain topic like capital raising or office space, then feel free to jump directly to a particular chapter.
Friendly Disclaimer
Please note that this book only provides high level information and should not be construed as providing legal advice in any way and is not intended as a substitute for proper legal, regulatory or any other type of advice.
In addition, although the author has made every effort to ensure that the information in this book is correct, the author does not assume and hereby disclaims any liability to any party for any loss, damage, or disruption caused directly or indirectly by any information contained herein.
Please also note that the masculine pronoun is used throughout the book for easy reading purposes and is meant to include the female gender as well.
2 Hedge Fund Industry Landscape in Asia
The Asian hedge fund industry started in the 1980s with a number of fund managers focusing mainly on Japan and almost exclusively with equity long/short strategies. The industry gradually evolved from there with the number of fund managers increasing and trading not only in Japan but throughout Asia. This growth continued and the industry had around US$200 billion in assets under management (AUM) just befo...