Incubator Hedge Funds

How to Create an Auditable and Marketable Trackrecord

One of the biggest hurdles that start up hedge fund managers face is the issue of having a marketable track record. Many managers do not have an audited marketable trackrecord for any number of reasons. While it is not strictly necessary to have an audited marketable trackrecord, it will help with the marketing efforts when soliciting investors, especially institutional investors. To solve this problem many start up managers establish incubator hedge funds.


Introduction to Incubator Hedge Funds

An incubator hedge fund is a very simple structure which typically includes a fund entity (please see article on hedge fund structures to be forthcoming) and a hedge fund management company. The incubator can be done either onshore of offshore, depending on the sponsor’s needs and marketing goals. A typical domestic incubator can be established within a couple of weeks and a track record

Who should use an incubator?

The incubator program is best for those future hedge fund managers who currently have another job or are in school. We have established many incubator funds for managers in school, both undergraduate and graduate school. Likewise, we’ve established incubators for managers who have jobs, both in and out of the investment management industry.

Who should not use an incubator?

There are limitations on the incubator hedge fund. Because the incubator fund does not have the traditional “full” offering documents that a traditional hedge fund would have, the incubator fund is usually only open to the actual managers of the fund (and not friends and family of the manager).  Thus, managers who would like to incubate a track record with outside money (friends and family is considered outside money) should create a full set of offering documents.

Incubator Hedge Fund Costs

Costs for establishing incubator hedge funds can vary, but usually domestic incubators can be done for less than $3,000 (which will usually include any state filing fees and registered agent fees). Costs for offshore incubator funds are typically higher. A BVI based incubator hedge fund will range anywhere from $4,000 to $6,000 and a Cayman Islands based incubator fund will range from $6,000 to $8,500.

Our incubator hedge fund package includes is a ten page consulting guide. The consulting guide will provide you an overview of the important laws you will need to be aware of and it will provide information to help guide you through the first 6 to 12 months of the hedge fund incubation process. The guide also provides you with helpful information on what you can do during the hedge fund incubation process to start lining up investors and making your incubator hedge fund ready to make the leap to full hedge fund. Many of this information can also be found throughout this website – please see How to Raise Money for a Hedge Fund.

Please contact us today about a free initial hedge fund incubator consultation. Please also view our hedge fund start up articles which is designed to guide new hedge fund managers through the regulatory and business issues which they will face starting a fund. Other related hedge fund law articles include:

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