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Continuing the story of the daring Hound and his escape from the shackles of corporate life to set up his own hedge fund startup.

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Things have been moving so fast it’s difficult to know where to start. The end result is an exhilarating milestone in CrystalClear’s journey – we launch on 1 September as an Experienced Investor Fund (EIF) based out of our Gibraltar office.

It has not been easy, predictable or linear progress. Two steps forward, one back and some unexpected stumbling in a manner similar to my last walk home from a good night at the pub.

Indeed at a couple of points it looked like we might have to radically rethink our strategy to get to market as set-up costs were looking higher than were modelled in our business case.

However we subsequently engineered the opportunity to become a fully independent vehicle in an umbrella structure provided by a new fund-of-fund business recently launched in Gibraltar.

This will mean a substantially reduced upfront, IT and trading cost overhead. The deal has been an excellent development in other ways too as it provides further synergies through access to an existing European marketing distribution network, an enhanced regulatory status, another layer of risk management, middle/back office coverage and the potential for a chunk of further seed funding.

In one sense it’s amazing that barriers to entry are low enough to mean a fully fledged hedge fund is a realistic target for a small business venture.

This generalisation shouldn’t mask the fact that there is an incredible amount to execute. In the last month we’ve produced our introductory prospectus and completed the majority of our website design.

We’ve interviewed and then appointed our prime broker, administrator, lawyers, and provided our track record data for audit by accountants.  And that’s not to mention the marketing drive in parallel to get to critical mass.

All this work has been aided by the fact that I have managed to wangle myself a redundancy package from my investment banking job giving me the financial buffer and even more critically the time to give the fund my full focus.

The current economic climate brings new challenges that would have been unthinkable two years ago. A good example being we’ve had to think long and hard about who to use as custodian.  The assumption that all the big names are bulletproof and a safe bet to hold capital is no longer a given.

There is a whole new layer of institutional risk to be considered and with the Bear Stearns saga, Lehman looking vulnerable, a rush to patch up balance sheets with knee-jerk rights issues and the rumour/fact surrounding a whole host of other investment banks, the level of client service provision is now secondary to us from the primary issue of the custodian’s core health.

On a personal note, having worked the entire 10 years of my career at two large institutions, I am unbelievably energised by this major entrepreneurial change in direction.

I’ve learnt an incredible amount at two great companies but was becoming weary of the greasy corporate pole. The opportunity to now make a break from the politics and conflicting agendas of the office jungle is a joy to behold.

So it’s a healthy and logical progression to find myself where I am now. And I know for sure I will not miss the daily four hour commute in an out of The City, although I’m sure I’ll find airport departure lounges as tedious when the novelty wears off.

Until next time…

We’ve had a long tradition of highlighting startups and giving them a chance to tell their story here on the SmallBizPod blog. Here’s one with a difference. Stay tuned to find out whether the daring Hound will succeed in getting a hedge fund startup off the ground.

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“You’re trying to set a hedge fund up now in these market conditions???!!!” This is typical of the baffled response I get when running this fact past folks recently. The timing for the outsider looking in seems at first glance to be questionable at best – akin right now to setting up a Gordon Brown Fan Club Merchandise store.

However my view has always been that if any new business looking to gain traction can tap into the zeitgeist of the moment and understand the hopes and dreams of the target client in full context of the environment, good or bad, then this can be used to advantage. By then putting some original thinking around established problems or received wisdom, it’s often possible to turn a potential downside into a compelling upside and in fact use that as a marketing opportunity.

And so it is in this context that we start to market ‘the hedge fund for the hedge fund cynic’ - CrystalClear Capital Management. Everything that Sub-Prime and the resulting Credit Crunch fiasco represent we stand against – unnecessary and dangerous complexity, blackbox PhD strategy, illiquidity, and uncontrolled leverage.

Instead we bring transparency, accountability, ruthless risk management and an intuitive concept that can be understood by anybody looking to invest.

In this way we have taken what could have been a tough backdrop and looked to turn it round to our advantage, by providing for individual and institutional investors an opportunity that understands and then allays their fears in regard to the financial markets right now. It also helps to explain to folks that hedge fund investment is no longer the preserve of the uber-wealthy. Minimum investment sizes are lower than many would imagine so seeking out the higher returns that can be achieved in volatile markets, whilst still ensuring risk is comprehensively managed, is within reach of many as part of their portfolio.

We are just beginning to start our marketing phase. Considering I’ve still got the day job at a big investment bank on the go too, until we get a critical mass of capital to launch, it’s a lot of work! I’ve not had this many balls in the air since I went naked skydiving on my stag weekend with 12 other lads. The moonlighting nature of the venture explains my pseudonym “HedgeFundHound” and the corresponding email contact details. Can’t have someone Googling me and finding this blog quite yet! However if this thing takes off in the next few months, a successful small business is created and I quit the day job. Then there will a ceremonial unveiling of my true identity…..which will mean nothing to anyone!

Next blog – “The Instant Hedge Fund – just add water”

Would love to hear from anyone with any questions, comments or suggestions!