The Most Important Step When Launching a Fund...

What's up guys? In this video, we're going to talk about why people start funds. There's a lot of reasons out there, you know, and I think it's good to evaluate what your reason is of why you would want to start a fund. So let's hop into it. Actually referencing this book, So You Want to Start a Hedge Fund by Ted Seides. I read it, you know, a couple years back. It was a good one. I'll give it like a 6, 7 out of 10, but I was looking over some of my notes here and there was one paragraph that caught my eye where he talks about a couple reasons why people start funds, and I want to expound on those a little bit in this video. First and foremost, he says one reason is because people want to put their name on the door. So I'm going to interpret that as like fame/legacy is kind of one reason. Think about it. A lot of these guys are coming from investment backgrounds where they're working for another name, a Goldman Sachs, a JP Morgan, a You know, last name capital is very common. You know, that's where a lot of these are first name capital, whatever. And a lot of people are motivated by that. They they want to you know be the name. They want to be in this in the in the spotlight. I would say you know fame kind of has a negative connotation, and then you know legacy. However, some people are just really motivated by. you know, leaving something more than themselves. So leaving something for future generations and, you know, actually building something that gives people jobs and makes people money. So, you know, I think both good and bad, you know, connotations there with it. I would say that's one of the main reasons why people start funds. Let's hop into the second reason why, you know, Ted calls it others yearn to break through the constraints placed on their investing activities. I'm going to call this one ambition. Like, and just straight up entrepreneurship is what people are driven by. Again, a lot of people that start funds, they've been working for somebody else prior and they've been doing trades and they're kind of siloed. They're not really portfolio managers. They're just put in a box and almost research analysts their entire life of, yeah, you're in charge of large-cap equities and these are our parameters that we have. This is what you can and can't do. So a lot of things there. A lot of people just are sick of people, others telling them what to do. And they just wanna have the liberty and autonomy to trade how they want. If people have worked for like a mutual fund or an ETF or any other, like even a financial advisor, there's a lot of restrictions. 'Cause so he calls it, you know, yearn to break through the constraints placed on their investing activities. There's a lot of restrictions on how you can trade So, you know, and hedge funds are obviously less regulated and you can take a lot more riskier positions and standpoints. And, you know, so as a hedge fund, and same goes for other types of, you know, assets as well with venture and, and private equity and, and, and real estate, you get to be the guy in charge. Okay. So, you know, number 1, fame slash legacy. Number 2 is kind of the ambition entrepreneurship type. And number 3, Ted calls it still more are just driven by the desire to compete at the highest level. I'm going to call this just straight up competition, winners, and passion. Like some people just love the game of investing, and you know alternative assets is kind of like the pinnacle of alternative in high finance. Like if you work for a fund, like you're at the top. Now, and if you're at a fund that beats other firms in terms of performance, like some people love that and they are just driven by, you know, the investing. They just love investing and they love, you know, what they're doing and they just want to win and, you know, be the best. And so I think that's kind of another core reason why people start funds. Obviously there's a ton of reasons out there, you know, why people start funds. We're just kind of, you know, covering some of the main ones today, help you think about why you really want to start one. So obviously the last one is money. Okay. Um, a lot of people want to make a lot of money. Um, now, and I think there's kind of good and, you know, I think it can be both good and bad, right? You know, there's, there's people that just want to be financially independent and have the financial security of, uh, you know, just living a good life. And they see, you know, running a fund as a, as a way to do that. You know, some people, and it's okay if you want to make a lot of money. I don't think there's anything wrong with that. But some people just want to assume, you know, masses and, you know, stupid irrational amounts of money. And I think that can be a little dangerous sometimes, especially in the early days. You know, if you watch some of our other videos, if you're not putting your investors first, your core objective should be to make your investors money and then obviously you can follow and make money with them. So I think there's a couple of different ways that people are driven by the financial benefits of running a fund, but that was probably the first one that came to your mind. But I think a lot of people ultimately are driven by a lot of other things. So I just encourage all of you who are watching this video, ask yourself, what is your reason and why do you want to get into this industry and what's your driving factor? And whatever it is, it's okay, but you need to have a why. Whatever it is, like, you need to think about that constantly, that reason that's motivating you to be in this industry, 'cause it's cutthroat, it's tough, there's some bullies out there, and there's gonna be times when you wanna quit. You have a bad quarter, you have a bad year, it's hard to stick to your guns and And stay in it. There's a reason that a lot of funds, you know, don't make it past year five. It's a tough industry. So really just encourage you guys to think about your why and just make it happen.