Private Equity
Asset class guide
EducationAsset class guide
Hedge Funds
Hedge funds raise capital continuously into open-ended funds that trade liquid markets.
Introduction to hedge funds
What you need to know
Structure
Open-ended fund, or a separately managed account.
Liquidity
Subscriptions and redemptions at set dates, with notice periods.
Investors
Pensions, endowments, funds of funds, family offices, private wealth.
Timing
Continuous, often starting with a founding investor.
How is a hedge fund raised?
A hedge fund raise has no final close. Investors can redeem.
Most hedge funds are open-ended. The manager raises for as long as the strategy has capacity.
Open-ended, with no final close
Subscribe
Investors subscribe at set dates, often monthly or quarterly.
Invest
In some funds an initial lock-up applies.
Redeem
Investors redeem at set dates, subject to notice periods.
How does a new manager raise?
A new manager often raises in stages.
Raising in stages
Founding investor
May commit early in return for better terms.
Founders' share class
Can be offered to the first investors.
Institutional allocators
Many wait for a track record and a minimum fund size before they invest.
Who invests in hedge funds?
Investors include pension funds, endowments, foundations, sovereign wealth funds, funds of hedge funds, family offices and private wealth platforms. Some invest through separately managed accounts held in their own name.
- Pension funds
- Endowments
- Foundations
- Sovereign wealth funds
- Funds of hedge funds
- Family offices
- Private wealth platforms
Who does the capital serve?
Many hedge fund allocators are pension funds. They invest on behalf of teachers, nurses and other public employees.
Endowments, foundations, sovereign funds and family offices invest alongside them, each on behalf of the people and institutions it serves.
What do institutional allocators look at?
Allocators decide on evidence. We help you present it.
01
Return record
The monthly return history, how returns behaved in difficult markets, the size and length of losses from peak, and how much of the result came from the strategy itself.
02
Strategy and capacity
What the strategy does, why it has produced results, and how much capital it can take before results are affected.
03
Risk management
How positions are sized and limited, how risk is measured and reported, and who has the authority to reduce a position.
04
Operations
The administrator, the auditor, the prime broker and the valuation policy, and whether the fund is run to the operational standard an institution requires.
Hedge Funds: the guide as a PDF
The same guide in print form, with the team and our contact details. For your own reading or to share with your partners.
Important information
For information only. This guide describes general practice in hedge funds fundraising, which varies between managers and allocators. It is not an offer or solicitation to buy or sell any security, and it is not investment, legal or tax advice.
