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A Guide to Starting Your Hedge Fund

Book Description

Successful hedge fund investing begins with well-informed strategy

A Guide to Starting Your Hedge Fund is a practical, definitive "how-to" guide, designed to help managers design and launch their own funds, and to help investors select and diligence new funds. The first book to examine the practical aspects of setting up and operating funds with a focus on energy commodity markets, this book scrutinises the due diligence process and comprehensively reviews the opportunities and risks of all energy commodity markets as hedge fund investments. Extensive planning and strategy advice prove invaluable to prospective fund managers and investors alike, and detailed discussion of the markets' constraints help inform procedural decisions. Readers gain insight into practical matters including legal and commercial structures, due diligence, fund raising, operations, and more, allowing them to construct a concrete investment plan before ever touching a penny.

Asset managers are looking to energy commodities to provide attractive uncorrelated - if volatile - returns. These high returns, however, are accompanied by high risk. Few investors have experience evaluating these investment opportunities, and few prospective fund managers understand the market fundamentals and their associated risks. This book provides the answers sorely lacking in hedge fund literature, giving investors and fund managers the background they need to make smarter decisions.

  • Understand the markets' structures, opportunities, and risks

  • Develop a comprehensive, well-informed investment strategy

  • Conduct thorough due diligence with a detailed plan

  • Examine the practical aspects of fund raising, legal and tax structure, and more

  • Oil has long been traded by hedge funds, but electricity, the fuels that generate electricity, and the environmental products like emissions allowances and weather derivatives have become the new "hot" investment strategies. These high returns come with higher risk, but A Guide to Starting Your Hedge Fund ensures participants have essential information at their disposal.

    Table of Contents

    1. Title Page
    2. Copyright
    3. Dedication
    4. Acknowledgements
    5. Part I: Why This Book?
      1. Chapter 1: Introduction
        1. Why This Book?
        2. The Big Picture and Energy Commodities
        3. Case Study: Amaranth Advisors
        4. Layout
        5. The Beginning
        6. Bibliography
    6. Part II: The Basics
      1. Chapter 2: What Is a Hedge Fund?
        1. I Already Know What a Hedge Fund Is
        2. A Little Bit of History
        3. So What Is a Hedge Fund?
        4. Hedge Funds (Un)Defined
        5. The Growth of the Hedge Fund Industry
        6. Hedge Fund + Commodities = Commodities Corporation
        7. Whither Energy and Commodity Hedge Funds?
        8. Moving Forward
        9. Bibliography
      2. Chapter 3: What Are Energy Commodities?
        1. Introduction
        2. What Are Energy Commodities?
        3. The Regionality of Electricity
        4. Why Are Energy Commodities Attractive for Investors?
        5. A Complex, Solvable Problem
        6. Drivers of Complexity
        7. Conditions for Solvability
        8. Principal Sources of Opportunity and Risk
        9. Bibliography
      3. Chapter 4: Trading and Investing in Energy Commodities
        1. Bottom-up and Top-down
        2. Trading + Managing a Business = Successful Hedge Fund
        3. The Edge?
        4. Trading Energy Commodities
        5. Basic Financial Knowledge for Commodities
        6. Conclusion
        7. Bibliography
    7. Part III: Starting the Journey
      1. Chapter 5: The Business Plan: Implications and Applications
        1. Introduction
        2. Objectives and Uses of a Hedge Fund Business Plan
        3. Conclusion
        4. Bibliography
      2. Chapter 6: Laws, Contracts, and Lawyers
        1. Don't Kill Your Lawyer
        2. Legal Basics for Funds
        3. Master–Feeder Fund Structures
        4. Side-Pocket Structures
        5. The Firm
        6. The Investment Advisory Agreement
        7. Attributes and Variations of the Investment Management Enterprise
        8. Structural Design Decisions
        9. Case Study: Complex Tax Structuring
        10. Be Nice To Your Lawyer
        11. Bibliography
      3. Chapter 7: Service Providers
        1. Introduction
        2. Long-Term Relationship: Service Providers and Marriage
        3. Service Providers: Who and Where?
        4. Negotiate, Negotiate, Negotiate
        5. Service?
        6. How to Choose?
        7. Final Thoughts
        8. Bibliography
    8. Part IV: Running the Business
      1. Chapter 8: Fundraising
        1. Strategic Investor Portfolio Design
        2. Start-up Lifecycle Analysis and Investor Portfolio Development
        3. Investor Acquisition – Marketing
        4. Tools for Marketing and Key Marketing Documents
        5. Marketing Documentation
        6. Investor Maintenance – Investor Relations
      2. Chapter 9: Operations and Infrastructure
        1. Introduction
        2. Infrastructure and Technology
        3. Bibliography
    9. Part V: Final Thoughts
      1. Chapter 10: Investing in Energy Commodity Hedge Funds
        1. Asset Allocation: Portfolio Building Basics
        2. Asset Allocation: Understanding Different Strategies
        3. Checklist for Investing in Energy Commodity Hedge Funds
        4. Bibliography
      2. Chapter 11: Quo Vadis
        1. Bibliography
    10. Appendix A: Sample Business Plan Outline
    11. Appendix B: Outline of a Confidential Explanatory Memorandum: Sample Offshore Feeder Ltd
      1. Table of Contents
    12. Appendix C: Sample Due Diligence Questionnaire Outline
      1. DDQ Outline
    13. Index
    14. End User License Agreement