How does a Hedge Fund start to raise capital

Welcome to the seventeenth Pari Passu newsletter,

Thank you for being a subscriber.

Today, we will learn more about:

1. How does a Hedge Fund raise capital at the beginning?

2. Capital Allocators – Venture Capital Panel Summary

What are the three ways to get a Hedge Fund off the ground?

“So You Want to Start a Hedge Fund: Lessons for Managers and Allocators” is a great book by Ted Seides that dives into how to set up and run your own hedge fund. In chapter 3, the author explains how raising capital works in the beginning. I don’t think that most of the readers of Pari Passu are planning to launch a fund, but learning more about how the industry works is always interesting and useful in the long run.

The issue at the core of raising capital when launching a fund is that most allocators (people responsible for deciding which hedge fund to allocate their money to) will only spend time investigating a fund that has grown to a decent size. It is easy to see how a fund that has not reached that level cannot get the attention of most allocators and struggle.

The author explains three ways to start out:

1. Bootstrap step by step

2. Jump start with a seed investor

3. Kick-start with discounted terms

Bootstrap step by step

Subscribe to Pari Passu Premium to read the rest.