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How do you start a hedge fund with no money
and make a billion dollars?
If you think it's clickbait
keep watching
Just as an FYI
What I'm about to share
is not meant to be a blueprint or a how-to guide.
It's just my personal experience
So your approach and results may vary
Now with that said
let's start with the five elements to launch a successful hedge fund
You will need pedigree
A track record
An investment strategy / process
A team
And of course outside investors
If you don't have all these elements already in place
Don't even think about starting a hedge fund
At least that's what everyone will tell you
The thing is
I didn't have pedigree
A track record
A team
or outside investors
All I had was two desks
An investment strategy
A process
And a single mission
So that's how I launched my firm back in 2014
Early on we gained some recognition as the first activist investor in Turkey
and the first Turkey-based investment team
with a global investment portfolio
and an international investor base
In our first year our portfolio companies
generated over a billion dollars in shareholder value for investors
Today we still make the bulk of our money on the long side of our portfolio
but what ended up happening is that our short targets put us on the map
which is why most people mainly know us
for our 64 billion dollar BAT short
Our clients include some of the leading single and multi-family offices in the world
managing around 20 billion in assets
Again I should note I had no pedigree, no track record, no team no outside
when I started four years ago
Everything had to be build up from the ground up
while people kept telling me
it wouldn't work and it couldn't be done
So how did I do it?
Well
here's the secret
If you're like me and you don't have the five elements already in place
what you do is you scrap the hedge fund idea
Yes
The secret is to just deep-six it
Think about it
If you had the money to allocate to a hedge fund
would you hand over your cash
to somebody who popped out of nowhere with no track record
I know I wouldn't
So in my case to get around this problem
I took myself out of the equation
What I mean by that
is you start with an actual investment opportunity
A listed company you want to invest in
and you approach investors with your investment thesis
to raise money for an SPV
which is basically a structure
that exists to make a single investment
This changes the dynamic
because the investors get to analyze an actual investment
rather than handing somebody a blank check and hoping for the best
which means it doesn't matter what school you attended
what investment bank you joined
or what big fund you worked at
All that matters
is the strength of your investment thesis
your investment strategy
and your process
Now the key to make this approach work
is to answer the three why's
Why this investment
Why now
And why invest with you
Depending on your investment strategy
this can be very easy
or very difficult
But if what you bring to the table
is truly unique
you will end up in a situation where an investor will put up all the money
and cover all your expenses to get up and running
The goal is not to make a big splash
The goal is to build a track record and credibility
which is what attracts talent and investors
The more traditional route of course
is to just go out there and launch a hedge fund
It's possible
but without experience
and an industry profile
you'll just end up banging your head against a lot of walls
And yes
Some of the most successful hedge funds
were started by first-time portfolio managers
in their 20s
Warren Buffett was 25 when he founded his fund
Ray Dalio was 26 when he founded Bridgewater
Seth Klarman was 25 when he founded Baupost
Ken Griffin was 22 when he founded Citadel
Paul Tudor Jones was 26 when he found a Tudor
Jim Chanos was 28 when he founded Kynikos
And David Einhorn was 28 when he founded Greenlight
It can definitely be done
But the truth is
the industry has changed a lot in the last 10 years
and regulatory changes
have made it much harder
to start small
and build up
Fortunately for you the industry is going through a transition right now
which creates significant opportunities
for people who bring something truly new and unique to the table
So if that's you
I would definitely encourage you to throw your hat into the ring
Just remember to drop me a line
when you get to your first billion
Hey you're not gonna get far watching YouTube videos all day
Let's get to work