Friends,
You might remember me from such posts as:
Long TSLA, Salesforce, Amazon, Google, Microsoft, Biohack the Future, and predicting the rise of Palantir.
Based on this writing and a few other prescient calls, some folks have approached me about managing money for them, which is something I'm very interested in.
I've spoken with a few fund managers and they've all agreed I have a niche, so I'm looking into what it would take to start a small fund.
I've spent the past decade plus in tech so I don't have any formal experience or certifications, which is a problem for managing money in Canada (you need at least 4 years of formal experience, the CIM or CFA designation, etc. etc.).
I'm meeting with a lawyer later this week to discuss alternative structures, but I wanted to ask WSO if the community had any advice.
Can anyone assist?
Based on the most helpful WSO content, here are some insights and considerations for your situation:
Regulatory Requirements in Canada:
As you mentioned, managing money in Canada typically requires formal experience or certifications like the CIM or CFA designation. Without these, you may face challenges in meeting the regulatory requirements for fund management. Consulting with a lawyer is a great first step to explore alternative structures that comply with Canadian regulations.
Alternative Structures:
If you lack the formal qualifications, one potential route could be setting up a structure where you act as an advisor or consultant rather than directly managing the money. This could involve partnering with a licensed portfolio manager or firm that can handle the regulatory aspects while you focus on strategy and client relations.
Focus on Niche and Track Record:
Your niche and track record in tech and your prescient calls could be a strong selling point. However, institutional investors or even HNWIs (High Net Worth Individuals) will likely want to see a referenceable track record and a clear investment strategy. Consider warehousing deals or creating a personal investment portfolio to demonstrate your capabilities.
Fundraising Challenges:
Raising capital without formal experience or certifications can be tough. You may need to rely heavily on your personal and professional network to secure initial commitments. Smaller LPs (Limited Partners) like family offices or HNWIs might be more flexible, but they can also be less predictable and require more effort to manage.
Legal and Structural Setup:
Proper fund structuring is critical. A Cayman master/feeder structure is often recommended for flexibility, especially if you plan to attract foreign investors or scale in the future. However, for a Canadian-based fund, you’ll need to ensure compliance with local securities laws and tax regulations. Avoid cutting corners on legal and structural setup, as it can lead to significant issues down the line.
Considerations for First-Time Funds:
Next Steps:
Starting a fund is a challenging but rewarding endeavor. With the right structure, strategy, and support, you can leverage your niche expertise to create a compelling offering for investors. Good luck!
Sources: Starting your own Fund/Firm, Starting small futures trading shop, What should I know before starting a Hedge Fund?, Private Equity in Canada - Updated, Where / How can I learn more about funds?
I am going to assuming you’d would do this under a prospectus exemption for accredited investors, which would require you to work through an investment dealer or exempt market dealer for distribution.
While it sounds like you have the investment side figured out, managing money is the same as any other operating business and requires compliance, operations, and all kinds of back and middle office operations under a regulatory framework that kind of sucks.
I would look at platforms like Spartan Fund Management where you can work under them as a solo fund manager and leverage their infrastructure in exchange for a percentage of your management fee and carry. Makes life easier and you can always go out on your own after a while.
Though this goes out the window if you are talking amounts of AUM large enough to justify building this all from scratch. Except distribution - regulatory speed bumps would take you at least a year to buy or start fresh on an ID or EMD
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