How hard is it to start a hedge fund relative to starting a tech startup?
I don't have any family in finance and only work within tech, so I apologize if this question is naive: how hard is it to become a hedge fund manager?
In the tech world, startup founders can come from a variety of backgrounds and schools. While all of them are talented and hardworking, there's a narrative that mostly anyone with the skills and ideas (coupled with opportunity) can realistically become a startup founder.
Does this same narrative extend to becoming a hedge fund manager? A quick google search shows that most famous ones come from top schools and storied backgrounds (for example: Cliff Asness was a leading PHD at uChicago and was handpicked to lead his own successful trading group at GS...Ackman, Griffin, Paulson all came from Harvard, etc.).
Do any of you have friends/family/acquaintances who started their own funds? How did they do? How obtainable is the goal of running your own fund?
Is there a population of hedge fund managers that operate with (relatively) modest AUM but lead successful lives (low-end millionaires, not billionaires)?
Now what if you launch a tech-focused startup hedge fund??
You're asking all the wrong questions. Even if they're from a well intentioned state of mind. I'll be blunt, this post comes off as a Disney tale asking the question of "who am I?!" in the middle of the movie's plot.
If you're in tech, and that's what you're blazenly good at, then why not fire something up with Ycombinator or Angelist or similar? If you're in the HF world, why aren't you espousing about your three-five year returns and minimal drawdowns on your strats and moves to draw in others?
To become an absolute manager (HF or Tech), you have to run people, not numbers. You have to know who is the right manager for my goal. Who do they need as support in analysts, execution traders, our GC, fundraising, IR, and who do I need as a COO to handle all this while I focus on the "big picture"? Or in tech, who do I bring in as a COO to run my team of product managers, devs, QA, sales, etc?
There are plenty of people that meet your idea of "operating their own fund" but answer to no one else. They're former traders and PMs or COOs etc that banked the capital to invest in theirselves, or in places they trust to get returns while sipping drinks on the beach "Trading Places" style.
My uncle started a small hedge fund. Harvard Econ -> Harvard MBA -> Hedge fund -> started his own. Maybe a few years in banking too. Closed up shop gracefully a few years into the ten year bull market and has money in the tens of millions. This all happened when his kids were children.
Curious how the process of starting a hedge fund differs from starting a prop shop. Far less moving parts when you aren't reliant on outside investors, but much more technology oriented. I've seen prop shops get VC backing quite similar to startups.
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It’s not hard to start a hedge fund, it is hard to beat the markets, but more importantly it is hard convince people to give you millions (or billions) of dollars when you have no verifiable record of managing money.
To create a hedge fund you just need tens of thousands of $ to setup the legal structure.
It is stupidly easy to start a tech company relative to starting a hedge fund. This is almost a laughable question.
lmao, any virgin code monkey can start a reasonably successful tech startup (i know family or family friends who have sold multiple startups in the ~15-70mm valuation area), but starting a hedge fund requires pedigree, people skills, a rolodex, brand name, and so on. i'd venture to say theres around 500 people on this planet who has a reasonable chance of successfully starting a hedge fund who arent already in a similar role
Aren’t you the guy still in high school?
A tech startup could be a few guys and a website, but a hedge fund needs real capital. You need wealthy people or institutions who are willing to commit a large amount of capital, and not all hedge fund managers are celebrities. I have a business colleague who is getting a new hedge fund off the ground with starting capital in the middle seven figures. This is considered a "small" amount of capital for a new fund in this sector.
It's attainable if you have access to capital, the relevant skills to run the business, and the ability to hire the right people. However, most new hedge funds fail. Making alpha consistently is a high-performance activity. Many try, most fail, and those who succeed collect great rewards. It can be compared to a competitive sport or the entertainment industry.
I wouldn't jump headfirst into something like this without knowing the right people. The hedge fund guys putting this together have years of experience working for these companies and are very intimate with the business. That's the only reason why they are able to confidently form their own fund and work with wealthy investors.
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