The Hedge Fund Hound let loose

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…

Alex is the founder and editor of SmallBizPod, the UK's first podcast dedicated to small business, start-ups and entrepreneurship. Alex writes about topical small business issues, entrepreneurs and anything else that catches his eye here on the small business blog. http://www.smallbizpod.co.uk