How To Start a Hedge Fund From Scratch in 2026

In today's video, we're going to talk about how to start a hedge fund from scratch. We're going to break down what is a hedge fund, how to build one, how to launch one, how successful people on Wall Street have launched their funds, how I've launched 2 different investment funds that I currently run right now. We're going to talk about hedge fund incubators, the licenses you need for funds, and all the intricacies of building your very own fund. Now, before I dive in, you might be wondering, who is this guy talking to you and why do I have authority to speak on this subject? Subject. So I currently run an 8-figure hedge fund. I've launched 3 funds prior. I've actually sold one of those funds. We also have a company called Fund Launch. We've launched 210 funds in the last 2 years, roughly 2 funds per week. We've gotten pretty good at the process of building funds, and about 25% of those funds are hedge funds. We have multiple funds that have come through our community that are $10 million funds and even as high as $100 million funds that we've helped build out, and launch. And a couple of them are getting close to a billion. We'll get there pretty soon, but we've gone through this a lot, this process, and seen what works and what doesn't. Additionally, my brother is an investment funds attorney at the largest law firm in the world, Kirkland Ellis, since retired and now is launching his own fund. And my dad also is the founder of a deca-billion-dollar family of real estate funds. So we've got a lot of experience in funds and fund knowledge, and so today I wanna share some stuff that we have seen from successful fund managers and what's made it work and not work. Now additionally, I've made a lot of videos on my channel. The number one comment I get is like, Bridger, there's no way you could ever start a hedge fund. You got to work on Wall Street for 30+ years before you could go launch a hedge fund. And maybe that is true, but what I like to do is study the most successful people, most successful fund managers of all time, and see what worked and what didn't work and copy what they did. Not what they say they did, what they actually did. So for example, Warren Buffett, Warren Buffett started his first fund at 25 years old, raised $105,000 for his first little syndication fund. Today, one of the most successful investors of all time, had 66 years to compound in this game. The next one, Ken Griffin, one of the most successful fund managers of all time, started trading at 19 years old, started his first fund at 20 years old, and by 30 years old was running a billion-dollar fund. Next one, Ray Dalio. Ray Dalio started at 26 years old when he started his very first fund or managing other people's money. Again, you see the pattern here. People got in early and they started moving. And by the way, all 3 of those guys all started their funds. They've raised about a quarter million dollars, relatively small amounts when they first started. But again, they got in and got going and other people started later in life. So it's okay to not start when you're in your 20s. Cathie Wood started when she was 54 years old and she actually said they had a very slow start. slow start on their launch. Now she's been in the game 14, 15 years and has done extremely well compounding over time. Here's another one in the private equity and venture space. This is Robert F. Smith, 39 years old, started Vista Equity Partners. He's the guy that went viral for paying off all the college kids' student debt at the graduation ceremony. That's him. Again, he's had all these years to compound and got in the game. Even Mr. Grant Cardone, love him or hate him, a lot of people don't realize Grant Cardone started pretty late in life for his fund. Grant Cardone before Cardone Capital was Just a sales trainer. At 52 years old, he launches Cardone Capital. As of the filming today, he is 66 years old, going on 67 years old. He has had what, roughly 14, 15 years to compound. Again, he got in the game. This is the most lucrative game on earth, running funds. So with that, again, no matter what stage you're in, I believe you can get in this game and I'll give you some few things as we're going to dive in. So with that intro, let's go to the whiteboard of truth and justice. And first off, let's define what's the difference between a hedge fund, private equity, venture capital, or real estate fund? Like, what do those terms even mean? And after launching now hundreds of funds through our community, I've actually helped all these type of people launch. So what they are, it's actually not that crazy. When you simplify it all down, they actually all run almost the same, and they have one big difference between all these. But in general, what is a fund? A fund is a pool of money. Investors— I'll use green here, green for money— Green investors that put money into this pool and slick-talking fund managers like me and you. I'm gonna put managers over here. We draw from this pool. We go make investments. Whenever those investments make money, the investments flow back to the pool. I'll use this green again. And then they get split between the manager and the investor. There's a split here. Very common split would be like a 2 and 20. A 2% management fee and 80/20 split. 80% to the investors, 20% to the managers, okay? This is not anything new. This is like back to the Middle Ages. It's like, hey, let's open up a blacksmith shop, put some money in, we're gonna buy this blacksmith shop or build it. Whenever it makes money, we'll split the returns. Okay, this is one of the oldest business models on earth, and yet it is produced today, literally in the 2024, 2025, 2026, like the most wealthiest people on planet earth. The Forbes 100 list is riddled with investment fund managers. So Bridger, what's the difference then? What is a hedge fund or a private equity? Like, what's the difference? The difference is what they invest into, their investments. It's the assets they buy. They're all pools of money. So for example, let's take a private equity fund. What is that? A private equity fund is a pool of money and they buy, ta-da, private equity, or they buy private ownership of private businesses. A good example is like Sycamore Partners. Sycamore Partners is on Wall Street. They own Aeropostale, Nine West Shoes. They were trying to buy Victoria's Secret. They own Staples department store. Those are all privately held companies owned by a private equity firm. We see some people that do even micro private equity. They go buy small businesses and they group them together. We have other videos on our channel that talk about this. Okay, venture capital. What is that? It's a pool of money and they invest into early-stage startups. The investment It is like Shark Tank. They invest into early-stage businesses, okay? So the only difference really is what they invest into. So what is a hedge fund? A private equity is private companies. A hedge fund is public securities, anything in the public market. So this is forex, stocks, bonds, crypto. That's the world of hedge funds, okay? That's the world they play in. Again, a pool of money and they go and invest in those investments. Now that's pretty basic stuff. So let's go one layer deeper. Let's flip this thing over. So this is how 99% of all funds raise their money through this little structure. The structure is right here. You have a— ta-da! A general partner and a limited partnership. Now, it's again just like before. The limited partnership, this is your pool of money or your fund. This is where all the money sits. And what happens is investors over here with the money sign, they're not called investors though. They are called I'll put them in green. Limited partners. Limited partners put money into a limited partnership that is managed by a general partner. And this is the fund managers. This is me and you. Okay? This is the people that manage the fund. Well, guess what happens? We help make investment decisions. The fund then goes and buys the assets. In this case, it would go and trade. Now additionally, this management side is sometimes split into another piece which I'll call the management company. And by management, I mean like investment management company. We'll come back to this in a minute, what this means. So again, you've got managers here in this bucket. I'll circle it here. Managers that help manage a limited partnership that goes and makes trades and For a hedge fund, it would make trades, or a private equity firm would go buy private equity. And whenever again those trades make money, they flow back to the limited partnership and they get split between the general partner and the management company. We'll talk about the differences of those 2 in a minute. And the limited partners up here, the wealthy individuals that have given money here. Now, this whole structure is governed by 2 documents that we lovingly call— I'm going to put it over— let's put it over here. The Bible. Okay, I call it the Bible. What they're actually called is the LPA and PPM. These 2 documents are thick documents. I mean, they're big, they're thick, okay? Thick with a CC, okay? Thick documents. Um, there's my, there's my joke for the middle of the video. How about you guys like that? These documents though are, let's call them, 100 pages each. I mean, they are big, and what they do is they tell all the details of how this relationship will work in the fund. Now, what's cool about funds is you get to write the Bible. You get to decide the covenants, the laws, all the stuff that happens in the fund. Now, once it's written, it's written. That's why I call it the Bible. Once it's written, you got to follow it. So, for example, if you say, hey, minimum commitment to this fund is $100,000. And we're going to write that down in our LP and PPM. You've got to follow that, okay? It's a minimum commitment is $100,000. Or this fund is only going to trade forex. We're only doing foreign exchange. If you get the best stock, maybe some stock or IPO deal you've ever seen, your fund cannot do it because in your bylaws you said we're only going to do foreign exchange. We aren't buying— Stocks. Shares of private companies, and you write that down. Now we can talk a lot about how you write these and make them broad or narrow, whatever you want to do, but you got to decide a lot. So a lot of the questions I get in the comments when you guys talk to me, Bridger, can I do this? Can I do that? 9 times out of 10, the answer is yes. You just write it down in your LP and PPM. Okay, now the cost of setting this up, like how much does this cost? A starting base price, I would put you at about $30,000. to build these entities and build these documents, for a lawyer to come and build all this for you, okay? And they're gonna come build this and figure this out. Now, in a second, I'm gonna share how you can do this for a lot cheaper and step into a hedge fund using something really cool called a hedge fund incubator. I'll come back to that in a second. Now, I wanna come back to a few questions that I'm sure I'm gonna get on. Number 1, licenses. What licenses do I need to do this? And then also, let's talk about this management company here. We have videos that talk about the difference between an investment advisor a registered investment advisor, and an exempt reporting advisor. Okay, and this management company would qualify as one of those things. If you are an investment advisor, you fall into the state level. RA falls into the federal level. An exempt reporting advisor is you're exempt from these things as well. But either any of these, a lot of times you need a Series 65 that allows you to give investment advice and get paid a fee for doing so. And so back to— we talked about this split of 80/20. I'm gonna put that right here, 80/20 split. So for example, let me walk through this. The limited partnership, the fund, makes some trades and we have a return of $100,000 net return. How that would look, okay, is it flows And we did this with, let's call it, $1 million, right? We did it with $1 million of invested capital. We got a 10% return, and we're running an 80/20 split, okay? The $100,000 goes here. We split it 80/20. So $80,000 would go to the limited partners, and $20,000 would come to the general partner here. Ta-da! Okay, is that making sense? And then additionally, we charged a 2% management fee, and for doing that on the million dollars, that would be an additional $20,000 that would go here. Okay, and again, I mentioned, just to clarify, this was $100,000 net. $100,000 net. Okay, so you probably had to make $120,000 to have net of that kind of scenario. So you'd have $20 grand here, $20 grand here, and then $80,000 here from the limited partners. Okay, that would be a very simplistic split. We have another video on this called— this is called a waterfall structure breakdown. Now I'm getting pretty crazy here. The last thing I want to add is people will ask me all the time, like especially with hedge funds, do we need a Series 7 or a 33 or a 6 or all these different things? The answer is maybe, but oftentimes you don't need it. A lot of these funds— I'm going to add this over here and then we're going to go to the next page— with licenses You can use— I'm gonna draw it right here— a prime broker. A prime broker will actually hold a lot of these licenses, allow you to get leverage and margin and all whatever else you want to do with your trading. The prime broker approves you on their platform, and then the— let's say you're at the limited partnership here and you want to make a trade. You go to the prime broker, they then help execute the trade, and and then the trade comes back and flows through that prime broker. You pay them some fees, but they hold the licenses, they hold all the margin, all the liability. Now, once you get big enough, bigger firms will kind of make their own broker-dealer, prime broker, and then that's why internally you see a lot of these traders that have to get Series 7s and 33s and 6s, all the different trading licenses. But on face value, for your first fund, you don't need to do really any of that. And a lot of times you can qualify as an exempt reporting advisor Which means you don't even need your Series 65. Again, talk to an attorney, get all that, but if you're under $150 million, you oftentimes can qualify for this exemption as an exempt reporting advisor, and you can do all of this using a prime broker without a license, which is pretty crazy. We have other videos that we can maybe link on this channel that we talk about this in more in-depth, but kind of cool. Now, I want to talk about this for a second as well. We're going to talk now about launching And scaling your own fund. Hopefully this is good so far. I'm trying to just give you tons of info 'cause that's why you're here, that's what we're talking about. Let's talk about this. $30,000 to launch. There's actually a really cool strategy where we can do this for a lot cheaper. Okay, so I'm gonna refresh our whiteboard here. We've got our general partner again. I'm gonna put GP, and we've got our limited partner here. Ship. And this is what's called a hedge fund incubator. I've actually met with a lawyer, talked for 2 hours about this whole structure, hedge fund incubators and how they work. This is a great stepping stone to get into hedge fund. Instead of paying $30,000, you pay $2,000, maybe $5,000 to set this whole thing up. It's a great stepping stone to, again, incubate your hedge fund. How this works, again, on the last page we talked about The LPA, the PPM, the Bible. That is where a lot of your cost comes from, from building this. It's pretty expensive to build an LPA, PPM. Again, that's $30,000. What a hedge fund incubator does is this: a hedge fund incubator does not have limited partners over here like we were saying before. It doesn't do that. You don't have any investors. No investors. And hence, because you don't have any investors, Or limited partners, you don't need an LP and PPM. So then, Bridger, like, how do you raise money? Well, what you do is your investors, they actually join the general partner. They become partners with you in the fund. So how this would look as an example, you would say, hey, I've got family, friends that want to give me money. I'm going to reserve 25% of the GP For me, the fund manager. The investors are gonna come and they put money in and they're gonna get split the remaining 75% pro rata, or just on a percentage basis, how much money they put in. And so somebody puts in $50 grand, they get, I don't know, 10%, and somebody puts in $100 grand, they get 20%, right, of the thing. And they all start filling up this general partner, and they actually are general partners with me. Like, they are part of my stuff. And we set up an operating agreement, which is much cheaper. Again, $2,000 to $5,000 for this. And there's an agreement and we are actually partners. And what we do is the general partner then commits the money. The money flows into the limited partnership of, let's call it, $200,000 flows in. And our $200,000 is here and then the $200,000 can start trading. And then when the trades make money, it just flows back here and then just flows here and you distribute it based on your operating agreement and as partners. So now, how does this play out and why would you even do this? Well, what's cool is now every year you can get an audit done on your limited partnership and actually have audited financials of a— this is a GPLP structure— of a fund. And now you can start building a track record of your trades. 'Cause it's hard when you're a trader, people always call BS, like, well, this one trading account, you know, crushed it. We got like a 200% return. And then investors go, well, how many trading accounts do you have? Well, I have 7 of them. And they go, you have 7 trading accounts? Okay, so this one did good, what about the other ones? And are they audited? And how many of your personal trades are in it? And are you handpicking and cherry-picking your best trades? This structure allows you to have a very clean track record and audit structure, and it allows you to take family and friends' money, put it into here through a structure. What happens down the road? Let's say you start crushing this and doing well. You can transition this structure to a full-out hedge fund and just make it a whole hedge fund. What you would do is you put it in your operating agreement, hey, at, at a certain point I can buyout. There's already a pre-agreed buyout clause where you can come and buy back all your shares from the GP. And probably you're going to pay back their principal plus a percentage return, okay? You buy back your general partner. You then— it's not going to— you still have to pay probably the $30 grand to go and set up your legal docs. But now you have a track record and you go set up maybe your management company and your prime brokers and you just go from there. But now you have 4 years of audited financials. It's a great way to step into this game of running a fund and starting to move in this direction. Now, the last thing I want to share and probably the most important thing of this whole thing is this process that we have learned on launching funds and I'll say more discovered launching funds. I've interviewed now hundreds of fund managers on how they launch their funds and how entrepreneurs launch their funds and what's funny is they all have this common theme and common thread of how they actually built their fund and launched to be successful. Because the reality is anybody can go hire a lawyer and spend some money and build a fund. The bigger question is, can you build a fund that investors want? This is the hardest task of a fund. Can you build a fund investors want? Anybody can do legal docs, can do this. So we've discovered this 4-step process that the biggest fund managers that we could interview and talk to, they all followed the same thing. We started to apply this into our group and now we've launched 210 funds. I have launched— I currently run 2 funds myself. I've run 2 funds prior, actually exited one of those funds, had a competitor come and buy us out. And so this has worked in real life for me and for a lot of people we've worked with. And we call this framework the Fund Launch Formula. I know you love my beautiful handwriting as well and there's 4 steps To this formula, I'm going to go through them pretty quickly. We have other videos that go way more in depth, and what we've figured out is we've actually plugged in all these frameworks. You want to flash the mega framework in other videos. I talk about this mega framework today. I'm going to drop some simple steps, especially when launching a hedge fund. Now again, most people when they want to launch a fund, the first thing they do is say, Bridger, I want to do legal. Like give me the lawyers. Let's go talk to the lawyers. And I always go, eh, hold on. Legal is your last step. Okay, that's step 4. Again, we wanna build a fund that investors want. Legal is the last step. When I talked to all these successful fund managers, this is what they did. So let me go back. Step 1 is what I call, and I'm gonna put this in air quotes, is have an incredible deal. Now if I'm talking to somebody that's doing real estate or private equity, it really is a deal. In your case, this is finding alpha. This is finding asymmetrical risk versus return, which is a fancy term for just saying, can I find something in trading or in what I'm doing that has relatively low risk for high return? If I can find that, that difference is called alpha. Now, I know you've probably heard high risk, high return, low risk, low return, which a lot of people will preach. Fund managers, us, we are paid Big money, billions of dollars, if we can find asymmetrical risk versus return. That's what we call a hedge fund. A hedge fund hedges downside risk and keeps upside return. Ray Dalio, I was actually just with him a few months ago. I met Ray Dalio in person. He told us, he's like, you can diversify away about 80% of your risk without losing your return. Again, that's how he runs his funds to find asymmetrical risk versus return. So what we do, and we have other frameworks and other videos that talk about how to find this, we call it risk control return. I won't talk about today, but we figure that out and stress test the model. And what we're going to do here is test, and this would be test portfolios and other things for a hedge fund, to really figure out do I have asymmetrical risk versus return and what things can I test or backdate or stress test to really make sure in Variable and fluctuating and moving markets that I really have asymmetrical risk versus return on this strategy. Number 2, the next step. Again, everyone's like, okay, I got that, let's go to legal. I'm like, eh, hold on, before you go to legal, okay? Step 2, this is what I call the frame stage. We are gonna frame the fund, specifically the fund out. How is the fund gonna run? So what are you gonna do for your waterfall structure? You're gonna run American or European waterfall? Are you going to do a general partner, limited partnership? What's your lockup periods? People have to come in for 6 months or a year or 5 years. What are you going to do with withdrawals or redemptions? If people want to pull money out of the fund, do you want to run an open-ended or closed-ended fund? Today I don't have time to go through all these. You can see our mega framework. We have other videos on this channel that talk through all these different things of framing out your fund. Where do you want to domicile? How do you want to structure it? And again, these are things that I like to figure out before going to a lawyer. You can go to a lawyer and they can teach you these things and they're going to bill you $1,200 an hour. And that's why I had a friend on his first fund, he spent over $500,000 setting up his first fund in legal fees because he didn't do this process. Because he had lawyers be his teacher. You don't want your lawyer to also be your teacher. It's a very expensive teacher, number one. And number 2, oftentimes lawyers don't see the strategy behind the frame. Let me give you an example. It's kind of like football. Could you talk to a referee and learn the rules of football? 100%. A referee will teach you where's the end zone, what's a 4th down, what's a punt, what's an extra point. All these— great, this is awesome. But it's a little bit different if you talk to Andy Reid, the head coach of the Chiefs. He also knows the rules but he applies a lot of strategy within the rules. Does that make sense? See the difference? We want to build a fund that investors want. Can we build a strategic edge in this fund that investors are dying to have within— think like there's— yeah, we all have the same lines, the rules which are important to understand. Follow the rules. I'm not telling you not follow those. Follow the rules. But within the lines, there's a lot of strategy that can be had. of what to run on a 3rd and long or a 1st and 10, or what do you do in this situation, that a referee may have a little bit different opinion than Andy Reid or Bill Belichick. Okay, a little bit different game. This then all drives to number 3, which is capital. What we've seen the most successful fund managers do, and this is what I've done, is you find a deal, asymmetrical risk, you frame the fund out, you put that into some kind of PowerPoint or presentation, and you actually go pitch investors before you do legal. You float this out to investors, you pitch, you say, you guys interested in this? Would this— does this apply? And what they're gonna do is poke holes in your fund, and you want them to poke holes. And what's gonna happen is you're gonna come back to step 1 or step 2, and you're gonna start iterating and building a fund again that investors want. That is the biggest deal, and you're gonna build this kind of iteration process. With them, then and only then. What we do in our black card group is we try to get these people at least— and what we're asking for here is verbal commitments. Hey, once the legal setup, if everything's like we talked about, can I put you down for a quarter million dollars? Can I put you down for half a million? And yeah, you know, if everything checks out legally, yeah, you know what, put me down for half a million. That's a verbal commitment, nothing legal, nothing legally binding, but a verbal commitment. We try to get people at least $2 million of verbal commitments. Before we go to legal, and then you go to legal and guess what happens? You walk in, you say, "Hey, I want XYZ with a drink and a side of fries." Boom bada bing, and lawyers say, "Great, I'd love to set it up for you." Lawyers are very good at taking orders. Yeah, I want to. I want to build this way with this frame and this stuff and all. Great. They put it together, and I mentioned thirty grand. Like my my last fund I spent. These lawyers typically charge thirty, forty, fifty, sixty thousand dollars because I showed up and I was prepared and I knew exactly what I wanted. I know funds very well. I walked in, I said, hey, I want this. I think they did it for about $15,000 when they normally charge $45,000, $50,000 because I had done the prep work. Does that make sense? And more importantly than saving money is building this. Again, a fund that investors want. When you do this iteration process, you build a fund that investors are dying to have. And guess what? You might go through this process and people might hate your idea. and poke holes and you go, wow, actually they have a pretty good opinion. You know what? Maybe we don't really have asymmetrical risk. It doesn't work in that situation. Thank goodness they poked holes in it before you spent 30 grand and spent a year of your life building a fund. This allows you to iterate and tweak and you know what? Let's go back to the drawing board and readjust. I'll tell you straight up, I had a fund in 2022 that we were gonna launch. I did this process. Our investors poked a lot of holes in it. Stuff that I hadn't thought about. We looked back and we finally just said, you know what? This fund is not worth launching. Why? We didn't launch the fund. Thank goodness I didn't launch the fund. It's the best thing I ever did. And then we went back to the drawing board, built a new fund, and we went through it and people loved it. We launched our Ugly Unicorn Fund. We raised $10 million in our initial launch. Boom. For a first-time fund manager in this space, we thought it was pretty good because we built a fund that investors want. So for this video, hope this was helpful. Go check out the other videos on our channel. Let me know down in the comments what you guys think. If you have questions, if you want me to make different videos or go on different tangents, But hopefully that gives you a big breadth of knowledge on building a hedge fund from scratch. See you guys in the next video. Bye.