Do you want to know exactly how much it cost to start a hedge fund business? If YES, here is a detailed cost analysis for starting a hedge fund business and raising finance.
Having provided you with a:
- Hedge Fund Industry Overview
- Market Research and Feasibility
- Hedge Fund Business Plan
- Hedge Fund Marketing Plan
- Hedge Fund Name ideas
- Hedge Fund Licenses and Permits
- Cost of Starting a Hedge Fund
- Hedge Fund Marketing ideas
We will consider how much it cost to start a hedge fund business from scratch including the operating costs.
How Much Does It Cost to Starting a Hedge Fund Company?
The cost of starting a hedge fund is in two folds; the cost of setting up the office structure and of course the capital meant for investment. The amount required to invest in hedge funds could range from 1 Million US Dollars to even multiple Millions of Dollars. So you must employ aggressive strategies to pool such cash together.
Regarding the cost of setting up the office structure, your concern should be to secure a good office facility in a busy business district. It can be expensive though, but that is one of the factors that will help you position your hedge fund firm to attract the kind of investors you would need. When it comes to starting a small scale hedge fund firm, the following expenditure should guide you;
- The Total Fee for incorporating the Business – $750.
- The budget for Liability insurance, permits and license – $5,000
- The Amount needed to acquire a suitable Office facility in a business district with 6 months’ rent up – front (Re – Construction of the facility inclusive) – $50,000.
- The Cost for equipping the office (computers, printers, fax machines, furniture, telephones, filing cabins, safety gadgets and electronics et al) – $5,000
- The Cost of Launching your official Website – $600
- Budget for paying at least two employees for 3 months and utility bills – $10,000
- Additional Expenditure (Business cards, Signage, Adverts and Promotions et al) – $2,500
- Investment fund – 1Million Dollars
- Miscellaneous – $1,000
Going by the report from the research and feasibility studies, you will need about 1.1 Million U.S. Dollars to set up a small scale hedge fund firm in the United States of America.
You will need over 2.5 Million U.S. dollars to successfully set – up a medium scale hedge fund firm. On the other hand, if you are considering starting a large scale hedge fund firm with several professionals under your payroll, then you should look towards budgeting well over 5 million United States dollars.
Financing your Hedge Fund Business
When it comes to raising capital to start a hedge fund firm, it is usually in two folds. Firstly you will need capital to set – up the business i.e. incorporating the business, getting the required license, renting / leasing an office space, and every other expense that is required by start – up firms.
Secondly, you will need to pool cash together from accredited investors; getting the required cash for investment in hedge fund can be a both challenging. Here are some of the options you can explore when sourcing for start – up capital for your hedge fund firm;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for loan from your bank / banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends.