Counting The Cost

Sun Dec 1, 2002


It costs more to start a fund of funds than many people think. The amount of assets needed to break even is higher than for a single-manager hedge fund and cutting corners probably won't pay


With failing markets and shrinking opportunities in investment banking, increasing numbers of proprietary traders, bankers and asset managers are taking out a new lease on their careers by planning to launch their own fund of hedge funds businesses. High potential rewards, an entrepreneurial lifestyle and an escape from an institutional environment may all be attractive reasons for taking the plunge.

A good business plan, however, must start with a realistic assessment of the startup costs and annual running expenses. These will largely depend on the scale and complexity of the structure that the aspiring managers want to create. The costs of implementing an ambitious business strategy can sometimes be shocking, if not actually discouraging.

When ACP Partners, founded by ex-Goldman Sachs Wealth Management men Alok Oberoi and Joseph Sassoon, considered launching a fund of funds with eight professional and support staff in 2001 they calculated that it would need an...

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