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Time is Money - Time to Market

Everyone knows that setting up a new hedge fund is a time consuming and costly undertaking, but it doesn’t seem to put off new managers, as demonstrated in 2020, when globally, 538 new funds were launched, despite the pandemic. It’s a risky business though, as 770 funds liquidated in the same period.

If you’ve been doing this a while, you’ll know the drill, but for new managers, choices made in the early stages will have a huge impact on the business and could mean the difference between success and failure.

Start-ups are costly

The cost base for establishing a new fund with a new manager is huge. AIMA suggests it is not uncommon for costs to reach in excess of $1m before any revenue starts to come in. Core costs include staffing, office space, administration and establishment costs, outsource fees such as legal, accountancy and compliance, IT infrastructure and system costs.

As most principals have a set amount of capital to set the fund up and operate it throughout its lifetime, it is absolutely crucial to do everything you can to speed up this process and get your fund to market and earning as quickly as possible. Every day that the fund is not accruing fees, costs are eating away at the capital.

FCA authorisation can take 6-12 months

The process of becoming directly authorised by the FCA can be slow and laborious, taking anywhere between 6-12 months just to get approval. For managers looking at reducing their time to market, a regulatory hosting platform might be the answer. Using a reputable platform and becoming an appointed representative can speed up the time to launch by a number of months Check out our comparison of the two routes here.

Turn months into $$

To be up and running, say, 4 months faster using a regulatory hosting platform might not seem like much, but to put it into perspective, a $50m fund charging 1% management fee generates $41,700 a month. Over a 4 month period that’s a whopping $166k. That’s a significant amount of revenue to miss out on and could make a big difference to the success of the firm.  Not to mention 4 months of track record on the board.

With businesses that move as quickly as hedge funds, time really is money.

OSMO offers a fully managed fund/manager launch service which could help you go to market quickly and compliantly, so you don’t leave any revenue on the table.

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