A Guide to Starting Your Hedge Fund

Chapter 7Service Providers

A wife lasts only for the length of the marriage, but an ex-wife is there for the rest of your life.

Woody Allen after his first divorce

Introduction

As has been described throughout the book thus far, a successful investment management enterprise will not only have consistent investment ­performance but also be built on a solid business foundation. When considering the management aspect of the investment management enterprise, one lens to use is that a substantial part of the management function is to manage relationships with service providers. These relationships are represented through a series of contracts that the investment management enterprise signs with a variety of service providers.

In this chapter, we cover important points to remember as you deal with individual service providers. The advice offered here is not meant to be exhaustive. Indeed, to propose that it could be would be foolhardy on our part. Each fund, each strategy, each individual manager will have varying needs depending on the type of investment strategy they wish to employ, the jurisdictions in which they operate, and based on how much they can afford or are willing to pay for particular services. As can easily be intimated, selecting service providers is a very sui generis experience for each investment management enterprise.

Additionally, although service provider relationships will be formalized via legal contracts, it is important to remember that first and foremost ...