Last week the Securities and Exchange Commission adopted rules that allow it to sue hedge fund managers for “misleading investors.” This is its response to last year’s court ruling throwing out a 2004 registration requirement. After reading about these new rules, I was reminded of a scene in The Untouchables movie between Elliot Ness and Al Capone. Ness, as most of you will recall, was played by Kevin Costner and Capone was played by Robert De Niro. The scene takes place in the lobby of the Lexington Hotel, Capone’s home, De Niro shouts, in a rage that only he could bring to the screen, “You got nothing; you got nothing!”
Yup, that’s what the new rules have: Nothing.
Didn’t regulators put these rules in place long ago? Has it been OK for hedge fund managers to mislead investors all this time (and none of us knew about it)? I don’t know, it just seems to me like a bit of a waste to formulate “new” rules about something that Franklin D. Roosevelt created the SEC to do in the 1930s. If I am missing something, let me know, please!
Anyway, on to the questions…
I received a number of inquiries about the steps you need to take before you get started building a hedge fund. Obviously, you need to get all your ducks in a row. You need to find a lawyer, a prime broker and an accountant, as well as to do some of the obvious business things like opening bank accounts, getting a tax identification number and finding office space. That being said, the best thing to do is to just jump in! Every day you wait is a day less of a track record you’ll have. In the beginning things are going to be very tough. There are going to be a lot of bumps in the road and days where you feel like jumping off a cliff. Don’t jump, things will get better and hitting bumps is the norm. A person who thinks every fund that’s launched begins with $500 million or a $1 billion are dreamers; the vast majority of funds start with less then $25 million. It takes patience and a bit of luck to build a successful business. Hopefully you will have it and find that the best time to start is right now.
Stay cool and drink lots of fluids.
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