It’s also important for managers of start-up funds to understand the numerous expenses associated with operating a hedge fund. As an example, many funds – like the $20 million fund described above – cannot afford a non-bundled third-party vendor’s order management system (OMS), risk management product, aggregation service, trade allocation module and attribution tools. Once a fund understands its expenses, it can determine exactly the asset level and performance combination necessary to cover those expenses and have an adequate profit. For a prospective start-up fund, this analysis will determine whether the business plan is realistic or needs refinement before it.
