Some of the wealthiest individuals in the world make their money by investing in or operating hedge funds. A hedge fund is a type of investment structure that minimizes risk by balancing opposite investment positions against each other. While starting your own hedge fund -- either using your money or investors' money -- is a potentially lucrative proposition, if you do not take care to do it in a conscientious and meticulous manner, you can possibly lose a lot of money. For this reason, make all of your investment decisions in a professional manner.
Instructions
1. Gain investment experience. Successful hedge fund operators do not simply graduate with bachelor's degrees in finance and immediately set up multimillion-dollar hedge funds: they first work as employees in the finance sector for several years, at least. Working for an investment banking firm will help you to gain much of the experience that you need.
2. Get legal counsel. Virtually no hedge fund operators set up their hedge funds unless they have the aid of an attorney. A finance attorney will help you to set up your hedge fund and management firm in the proper jurisdiction and make sure that you meet all legal obligations to that jurisdiction.
3. Raise capital. Hedge funds need to have at least $5 million in investment capital to make start-up and operation costs worthwhile. If you do not have sufficient assets on your own, you can raise money by getting other parties to invest in your hedge fund. Laws typically discourage conventional advertising for the purpose of finding hedge fund investors, but you can find investors through personal networking. Focus on wealthier individuals, as they are more capable of dedicating their money to investment and you will be able to raise more capital through a smaller amount of contacts.
4. Set up an office. Depending on the scale and strategy of your hedge fund, you may be able to operate it alone or you may need to hire employees. Many hedge fund managers work alone and do everything through a high-speed Internet connection at home.
5. Start making investments. Do not let promises of high yields trick you into making a lot of high-risk investments: the time-tested strategy of a successful hedge fund is to minimize risk by taking opposing market positions that average out to give you a stable, upward trend of value.
