Hedge Fund Investing: A Practical Approach to Understanding Investor Motivation, Manager Profits, and Fund Performance

Organizational Structure

The typical multistrategy firm is significantly larger in scale than most single-strategy funds. Even within the category of multistrategy funds, there may be significant differences in the organizational model and approach to generating results.

Some multistrategy firms may be holistic, strategic, and homogeneous and try to attract and retain teams that are fully integrated into the firm's core vision and outlook. Traders who join this sort of firm are attracted to the opportunity to work with the firm's founder and are willing to participate in the broad capital-raising and business or risk management objectives of the firm.

Other multistrategy firms operate more like a collection of individual traders rather than a team, and the firm is organized much more tactically, with silos for each business and compensation models that support or attract traders who don't want to be part of a broader business per se. Traders who join this sort of firm are attracted to the operational, compliance, and capital-raising platform being offered.

Either way, a multistrategy firm requires a significant investment in infrastructure, people, and process to support the diversified products and strategies offered to investors. It is rare for a firm to launch itself as a multistrategy shop. Very often a firm starts off with a single strategy, and once it has reached scale and perhaps capacity limits, it opens the door to new ideas and strategies by hiring experienced teams ...