Best city to start a hedge fund in 2021

Long/short equity portfolio. Aiming on boutique operation with ~ 100 mil $ as an intermediate goal.

Your opinions? And why?

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Comments (44)

Controversial
Dec 25, 2020 - 12:27pm

Austin TX. Other will come in due time (already are to an extent)

Ugh the FBI still quotes the Dow... -Matt Levine
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Most Helpful
Dec 25, 2020 - 3:48pm

praxis

Arguments?

No income taxes
Desirable weather (although personal preference)
Growing young educated professional demographic
College town presence adds energy but not overwhelmingly so
Centrally located to fly both east/west coast
Something for every lifestyle with music, food, culture, bars, nightlife, outdoors

There are many hedge funds, PE, and asset mgmt shops out there already, so you will be able to build a network. (Obvi not the breadth of NYC, but how many contacts do you really need in your life?)

Ugh the FBI still quotes the Dow... -Matt Levine
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Dec 29, 2020 - 12:26am

I would second Texas as a whole but would say Dallas over Austin from a business perspective since travel is much easier, and there is a larger network of existing funds to collaborate with and poach talent from.

Dec 25, 2020 - 1:18pm

This is such a personal question. If it was me, I would do the city I liked the most. It's really disruptive on your life to move around so it makes sense to settle down somewhere you like. 

analysts are mostly commodities. If you have a repeatable process then it doesn't matter who you hire. There are talented people everywhere - not just in New York. I don't think talent should drive decisions of where you set up shop 

  • Quant in HF - Other
Dec 25, 2020 - 1:28pm

BobbybananamA

analysts are mostly commodities. If you have a repeatable process then it doesn't matter who you hire. 

It is not very true in the quant world. Some good hire could make a difference for the firm/group, and good hires are usually clustered around top universities. There should be an extremely strong reason for someone from that community to move to a non-trivial place.

Dec 27, 2020 - 10:42am

To be honest I think it's equally true for quants. In the past they could bring in unique research expertise, but today the work is pretty standard. It's not really true that the best hires are only from top schools either. I'm one of them myself and know many others with the same background who are pretty mediocre in my view.

  • PM in HF - EquityHedge
Dec 26, 2020 - 10:45pm

Austin or Dallas over Miami.  These other options are totally unrealistic because you need to attract people. Quality of life is just higher if you can move people. 

  • Associate 3 in HF - EquityHedge
Dec 27, 2020 - 1:18am

Is the comp lower in Austin/Dallas vs NY/SF because there aren't as many fund options (as a developing market vs mature markets)?

  • PM in HF - EquityHedge
Dec 27, 2020 - 2:00am

Founders move to fl/tx to not pay income taxes themselves and frustration with nyc.  I see no evidence they do it to pay investment employees less.  They still want the best talent and are willing to pay for it.

Saying that the current talent pool in these places is lower than nyc currently is correct and therefore compensated lower, but it is missing the point. You are not going to get compensated less in fl/tx than nyc if you are a valuable investment professional who moves to have a better quality of life and taxes unless you take a worse job but most doing it are not switching firms or jobs.  Your causation is messed up.

For non investment professionals I think there could be a cost of living adjustment.

Dec 27, 2020 - 2:46pm

NYC > London/Connecticut > SF > Singapore/HK

Austin/Miami/Dallas/RandomMidwestState are great to visit, but who would actually want to live there? The driver of growth is population, technology, and capital. I don't see TX/FL/CO being able to compete with NY/CT/CA, because their low tax rates can't sustain a higher population/major infrastructure/major investment program/major research universities to the same level as the aforementioned. High tax + high pop (NY/CA) > high tax + low pop (CT) > low tax + low pop (CO/NE) > low tax + high pop (TX/FL). 

Now, your personal residence might be in a low tax region, but that's a different story.

Dec 30, 2020 - 1:25am

Austin doesn't have the infrastructure for a large research university?

Pretty decent population of UT Austin HF founders and employees who are only in New York for the job and would split in a heartbeat for TX if they could work remote.  As for capital raising though your probably correct.

A large multimanager I know prior to COVID had been SPECIFICALLY looking to launch non-NY PMs. They say less groupthink, but I'd guess it's because PMs in non-NY/SF/Chicago don't shop around as much and will take a lower rate due to some attachment to their area and less poaching risk. Just my speculation.

A year ago I looked around for a role that would let me remote in Non-NY and it was basically a no-go. More recently the same funds were generally open to the idea (and I took one). Unless you're MM you don't need to be at every conference and mgmt visit and sell-side round table lunch etc.

I respect NY but I truly despise living there. I like trees and space and for my social-time to have very little work-talk.

Just an alternative view, i know that's not the norm, but it's also far from an anomaly mindset.

Dec 30, 2020 - 12:52pm

It's correct to say that different strategies have different requires for location. Also, strategies with longer time horizons don't typically invest with an informational advantage for quarters or soft catalysts. You can set up an ivory tower anywhere. 

However, for most long/short equity, global macro, and credit strategies, informational networks are key, and those are only present at hubs. Another note:  investment-centric hedge fund job is not a career. For most people, it is 5-10 years of hyper-intense competition, followed by semi-retirement or management/entrepreneurship roles. 

  • Associate 3 in PE - Other
Dec 31, 2020 - 1:59pm

Denver Colorado or Vail / Aspen Colorado.  

There are basically zero hedge funds here so you pull those investment savants who love outdoor sports (Skiing, mountain biking, etc.).   If they decide to leave, they have nowhere to go in the area. 

For base level talent, if you pay you can pull people out of Janus Henderson,  Arrowmark, Denver PE funds, and you can pull back office from Schwab

SOs can get good jobs as well as there is an OK tech presence. 

  • Associate 3 in HF - EquityHedge
Jan 4, 2021 - 11:57pm

I have been looking for a fund like this pretty much since covid started and have yet to find one that will allow permanent remote work. Any pointers?

Jan 17, 2021 - 1:39am

I Have a couple of questions...

Can one charge a performance fee of 30% per month for a Forex fund? 

When forming the LLC under the business activity what should it be named? 

When forming the P.P.M and the L.P documents what is important to include in those documents?

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