Hedge Fund Business Plan Template
If you want to start a Hedge Fund or expand your current Hedge Fund business, you need a business plan.
The following Hedge Fund business plan template gives you the key elements to include in a winning Hedge Fund business plan.
Hedge Fund Business Plan Example
I. Executive Summary
Business Overview
[Company Name] specializes in alternative investing using money and assets pooled from accredited investors, with the goal of maximizing returns and minimizing risk. [Company Name] employs fund managers experienced in using a range of strategies to earn above-average returns. Generating superior, risk-adjusted investment returns is the main driving factor for the success of [Company Name].
Techniques
[Company Name] will provide pooled fund investment services that seek to make high returns, using the following techniques:
- Rapid price discovery
- Mathematical and statistical processing
- Risk measurement and control
- Active trading
Customer Focus
[Company Name] will primarily serve high net worth individuals in the [location] metro area. The demographics of these customers are as follows:
- 345,600 high net worth individuals
- 7.52% of households in the state are accredited investors
Management Team
[Company Name] is headed by its founder, [Founder’s Name] who graduated from [University] with a degree in Business Administration. Prior to starting [Company Name], [Founder’s Name] worked as an investment manager for [x] years at an investment firm where he was able to learn the ins and outs of the investment industry. This experience will be the company’s most valuable asset.
Success Factors
[Company Name] is uniquely qualified to succeed for the following reasons:
- [Company Name] will fill a specific market niche, providing investment options for the large population of high net worth individuals in the area.
- In addition, we have surveyed the target market and received extremely positive feedback saying that they explicitly want to make use of our services when launched.
- The management team has a track record of success in investment services.
Financial Highlights
[Company Name] is seeking a total funding of $250,000 of debt capital to open its hedge fund business. The capital will be used for location build-out, hiring initial employees, marketing expenses and working capital.
Specifically, these funds will be used as follows:
- Headquarters design/build: $50,000
- Working capital: $200,000 to pay for marketing, salaries, and lease costs until [Company Name] reaches break-even
Topline projections over the next five years are as follows:
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $738,000 | $1,716,272 | $2,007,297 | $2,331,125 | $2,694,524 |
| Total Expenses | $639,595 | $1,021,515 | $1,110,127 | $1,190,308 | $1,273,715 |
| EBITDA | $98,405 | $694,757 | $897,169 | $1,140,817 | $1,420,809 |
| Depreciation | $16,560 | $16,560 | $16,560 | $16,560 | $16,560 |
| EBIT | $81,845 | $678,197 | $880,609 | $1,124,257 | $1,404,249 |
| Interest | $18,554 | $16,235 | $13,916 | $11,596 | $9,277 |
| Pre Tax Income | $63,291 | $661,962 | $866,694 | $1,112,661 | $1,394,972 |
| Income Tax Expense | $22,152 | $231,687 | $303,343 | $389,431 | $488,240 |
| Net Income | $41,139 | $430,276 | $563,351 | $723,230 | $906,732 |
II. Company Overview
Who is [Company Name]?
[Company Name] offers hedge fund investment services to high net worth individuals in the area. With a mix of investment strategies, [Company Name] can provide options for all risk appetites. Generating superior, risk-adjusted investment returns is the main driving factor for the success of [Company Name]. Through advanced technology, [Company Name] can provide greater investment flexibility and maximize returns.
[Company Name]’s History
[Founder’s Name] has been an investment manager for [x] years, with one of the largest investment firms in the US. In [year], his success at the investment firm led him to start his own hedge fund company. His lawyer has advised [Founder’s Name] that [Company Name] should be incorporated as an S-Corporation on [date of incorporation].
[Founder’s Name] has identified the neighborhood and building [Company Name] will be located. He has begun lease negotiations and pricing out construction to transform the building into a comfortable office suitable for receiving wealthy clients.
Since incorporation, the company has achieved the following milestones:
- Found location and signed Letter of Intent to lease it
- Decided on the company name, and developed the logo and website located at www…
- Finalized services the company will provide
- Began recruiting key employees
[Company Name]’s Products/Services
[Company Name] has over $X in Assets Under Management. Each investment is closely monitored to ensure clients realize maximum return.
[Company Name] will seek to make high returns, using the following techniques:
- Rapid price discovery
- Mathematical and statistical processing
- Risk measurement and control
- Active trading
III. Industry Analysis
Demand for the Hedge Fund industry’s services is determined by the success of the industry, the level of general economic activity, financial market conditions and larger demographic trends. As the level of investor uncertainty declines, higher investor risk tolerance increases demand for alternative asset vehicles, which tend to be riskier than traditional investments. Further, pension funds and other institutional investors frequently buy alternative investments as they seek out high returns.
Over the next five years, an increasing number of IPOs is expected to ensure higher demand for the Hedge Fund industry, as these companies require investors. Further, as the S&P 500 is forecast to perform strongly, demand for hedge fund will increase in kind.
IV. Customer Analysis
Demographic Profile of Target Market
[Company Name] will primarily serve high net worth individuals in the [location] metro area. The demographics of these customers are as follows:
- 345,600 high net worth individuals
- 7.52% of households in the state are accredited investors
The precise demographics of the area are as follows:
| Wilmette | Winnetka | |
|---|---|---|
| Total Population | 26,097 | 10,725 |
| Square Miles | 6.89 | 3.96 |
| Population Density | 3,789.20 | 2,710.80 |
| Population Male | 48.04% | 48.84% |
| Population Female | 51.96% | 51.16% |
| Target Population by Age Group | ||
| Age 18-24 | 3.68% | 3.52% |
| Age 25-34 | 5.22% | 4.50% |
| Age 35-44 | 13.80% | 13.91% |
| Age 45-54 | 18.09% | 18.22% |
| Target Population by Income | ||
| Income $50,000 to $74,999 | 11.16% | 6.00% |
| Income $75,000 to $99,999 | 10.91% | 4.41% |
| Income $100,000 to $124,999 | 9.07% | 6.40% |
| Income $125,000 to $149,999 | 9.95% | 8.02% |
| Income $150,000 to $199,999 | 12.20% | 11.11% |
| Income $200,000 and Over | 32.48% | 54.99% |
V. Competitive Analysis
Direct & Indirect Competitors
Capital Group
Established in 1972, Capital Group is a privately held venture capital business focused on energy, financial, enterprise, healthcare, internet, and mobile startups based within its metro area. Capital Group-backed companies account for more than 25% of NASDAQ’s total value and has invested on behalf of non-profits and schools like the Ford Foundation, Mayo Clinic and MIT. Capital Group has invested in 1,664 companies (with 675 Exits) with a current Portfolio of 369. The firm has more than $38 billion in assets under management.
Vestavia Venture Partners
Established in 1911, Vestavia Venture Partners is a privately held venture capital business focused on locally-based consumer, enterprise, and healthcare startups. Currently, the company has more than $4B in assets that it manages. Vestavia Venture Partners primarily offer seed and Series A investments. VVP funded the early stages of well-known technology companies, and has helped build 120 IPOs in the last 50 years, including some of the largest technology companies. Vestavia Venture Partners has 16 investing partners operating from offices in Silicon Valley, San Francisco, New York City, Boston, Israel, and India. VVP has invested into 1,407 companies (with 551 Exits) with a current Portfolio of 262.
Accelerate
Established in 1983, Accelerate is a privately held venture capital business focused on commercial products, healthcare, mobile, and infrastructure sectors based out of Palo Alto, CA. Accelerate has some $9.6 billion under management, makes early-stage investments mostly in software and networking companies. Accelerate has invested into 1,954 companies (with 433 Exits) with a current Portfolio of 598 companies.
Competitive Advantage
[Company Name] enjoys several advantages over its competitors. These advantages include:
- Location: [Company Name]’s business is not limited to its location because it primarily operates online.
- Client-oriented service: [Company Name] will have a full-time customer service manager to keep in contact with clients and answer their everyday questions.
- Management: [Founder’s Name] has been extremely successful working in the industry and will use his expertise to ensure maximum returns for his clients. His unique qualifications will serve customers in a much more sophisticated manner than [Company Name’s] competitors.
- Relationships: [Founder’s Name] knows many of the local leaders, high net worth individuals and other influencers within [location]. With his [x] years of experience and good relationships with these demographics, he will be able to develop an initial client base.
VI. Marketing Plan
The [Company Name] Brand
The [Company Name] brand will focus on the Company’s unique value proposition:
- Results-focused hedge fund services, that minimize risks while ensuring maximum returns
- Service built on long-term relationships
- Thorough knowledge of our clients and their varying needs
Promotions Strategy
[Company Name] expects its target market to be high net worth individuals working and/or living within [metro area]. [The Company’s] promotions strategy to reach these individuals includes:
Publications
[Company name] will announce its launch several weeks in advance through publicity pieces in targeted newspapers and publications. Regular advertisements will run to maintain exposure to relevant markets.
Direct Mail
[Company Name] will blanket relevant demographics with direct mail pieces. These pieces will provide general information on [Company Name], and/or provide other enticements for people to use our services.
Online Marketing
[Company Name] will maintain a website and publish ongoing reports on fund performance. It will invest resources in two forms of geographically-focused internet promotion—organic search engine optimization and pay-per-click advertising. The Company will develop its website in such a manner as to direct as much traffic from search engines as possible. Additionally, it will use highly-focused, specific keywords to draw traffic to its website.
VII. Operations Plan
Functional Roles
[Company Name] will carry out its operations at its headquarters in [Location]. The business location will be used for sales, customer service and client meetings. It will house [x] full-time staff.
[Founder’s Name] will work as the primary fund manager for the company, although additional experienced professionals may be trained in the company’s investment activities over time.
The Company intends to employ [x] admin staff, and will initially outsource legal and audit needs. In order to execute on [Company Name]’s business model, the Company’s employees will fill the following roles:
Service Functions
- Assistant Manager
- Investment professionals
- Marketing professionals
- Customer service representatives
Administrative Functions
- General & administrative functions including marketing, bookkeeping, etc.
- Compliance and reporting
Milestones
[Company name]’s long term goal is to become a respected and trusted hedge fund company. We seek to be the standard by which other local investment firms are judged.
The following are a series of steps that lead to our vision of long-term success. [Company Name] expects to achieve the following milestones in the following [xyz] months:
| Date | Milestone |
|---|---|
| [Date 1] | Finalize lease agreement |
| [Date 2] | Design and build out [Company Name] |
| [Date 3] | Hire and train initial staff |
| [Date 4] | Kickoff of promotional campaign |
| [Date 5] | Launch [Company Name] |
| [Date 6] | Reach break-even |
VIII. Management Team
Management Team Members
[Company Name] is headed by its founder, [Founder’s Name] who graduated from [University] with a degree in Business Administration. Prior to starting [Company Name], [Founder’s Name] worked as an investment manager for [x] years at an investment firm where he was able to learn the ins and outs of the investment industry. This experience will be the company’s most valuable asset.
Hiring Plan
[Founder] will serve as the Manager of [Company Name]. In order to launch, it needs to hire the following personnel:
- Administrative assistants: 2 full-time employees to manage the day-to-day operations and customer service
- Investment professionals: 2 experienced professionals
- Marketing: Skilled, creative marketer who has experience serving the finance industry
IX. Financial Plan
Revenue and Cost Drivers
[Company Name]’s revenues will come primarily from management fees and from successful investments.
Labor expenses are the key cost drivers of [Company Name]. The major cost drivers for the company’s operation will consist of:
- Salaries
- Compliance and fees
- Outsourced legal and accounting services
- Lease on business location
Ongoing marketing expenditures are also notable cost drivers for [Company Name].
Capital Requirements and Use of Funds
[Company Name] is seeking a total funding of $250,000 of debt capital to open its hedge fund business. The capital will be used for location build-out, hiring initial employees, marketing expenses and working capital.
Specifically, these funds will be used as follows:
- Headquarters design/build: $50,000
- Working capital: $200,000 to pay for marketing, salaries, and lease costs until [Company Name] reaches break-even
5 Year Annual Income Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| Revenues | ||||||
| Product/Service A | $151,200 | $333,396 | $367,569 | $405,245 | $446,783 | |
| Product/Service B | $100,800 | $222,264 | $245,046 | $270,163 | $297,855 | |
| Total Revenues | $252,000 | $555,660 | $612,615 | $675,408 | $744,638 | |
| Expenses & Costs | ||||||
| Cost of goods sold | $57,960 | $122,245 | $122,523 | $128,328 | $134,035 | |
| Lease | $60,000 | $61,500 | $63,038 | $64,613 | $66,229 | |
| Marketing | $20,000 | $25,000 | $25,000 | $25,000 | $25,000 | |
| Salaries | $133,890 | $204,030 | $224,943 | $236,190 | $248,000 | |
| Other Expenses | $3,500 | $4,000 | $4,500 | $5,000 | $5,500 | |
| Total Expenses & Costs | $271,850 | $412,775 | $435,504 | $454,131 | $473,263 | |
| EBITDA | ($19,850) | $142,885 | $177,112 | $221,277 | $271,374 | |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 | |
| EBIT | ($56,810) | $105,925 | $140,152 | $184,317 | $234,414 | |
| Interest | $23,621 | $20,668 | $17,716 | $14,763 | $11,810 | |
| PRE-TAX INCOME | ($80,431) | $85,257 | $122,436 | $169,554 | $222,604 | |
| Net Operating Loss | ($80,431) | ($80,431) | $0 | $0 | $0 | |
| Income Tax Expense | $0 | $1,689 | $42,853 | $59,344 | $77,911 | |
| NET INCOME | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 | |
| Net Profit Margin (%) | - | 15.00% | 13.00% | 16.30% | 19.40% |
5 Year Annual Balance Sheet
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Cash | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 | |
| Accounts receivable | $0 | $0 | $0 | $0 | $0 | |
| Inventory | $21,000 | $23,153 | $25,526 | $28,142 | $31,027 | |
| Total Current Assets | $37,710 | $113,340 | $184,482 | $286,712 | $423,416 | |
| Fixed assets | $246,450 | $246,450 | $246,450 | $246,450 | $246,450 | |
| Depreciation | $36,960 | $73,920 | $110,880 | $147,840 | $184,800 | |
| Net fixed assets | $209,490 | $172,530 | $135,570 | $98,610 | $61,650 | |
| TOTAL ASSETS | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 | |
| LIABILITIES & EQUITY | ||||||
| Debt | $317,971 | $272,546 | $227,122 | $181,698 | $136,273 | |
| Accounts payable | $9,660 | $10,187 | $10,210 | $10,694 | $11,170 | |
| Total Liabilities | $327,631 | $282,733 | $237,332 | $192,391 | $147,443 | |
| Share Capital | $0 | $0 | $0 | $0 | $0 | |
| Retained earnings | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| Total Equity | ($80,431) | $3,137 | $82,720 | $192,930 | $337,623 | |
| TOTAL LIABILITIES & EQUITY | $247,200 | $285,870 | $320,052 | $385,322 | $485,066 |
5 Year Annual Cash Flow Statement
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| CASH FLOW FROM OPERATIONS | |||||
| Net Income (Loss) | ($80,431) | $83,568 | $79,583 | $110,210 | $144,693 |
| Change in working capital | ($11,340) | ($1,625) | ($2,350) | ($2,133) | ($2,409) |
| Depreciation | $36,960 | $36,960 | $36,960 | $36,960 | $36,960 |
| Net Cash Flow from Operations | ($54,811) | $118,902 | $114,193 | $145,037 | $179,244 |
| CASH FLOW FROM INVESTMENTS | |||||
| Investment | ($246,450) | $0 | $0 | $0 | $0 |
| Net Cash Flow from Investments | ($246,450) | $0 | $0 | $0 | $0 |
| CASH FLOW FROM FINANCING | |||||
| Cash from equity | $0 | $0 | $0 | $0 | $0 |
| Cash from debt | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| Net Cash Flow from Financing | $317,971 | ($45,424) | ($45,424) | ($45,424) | ($45,424) |
| SUMMARY | |||||
| Net Cash Flow | $16,710 | $73,478 | $68,769 | $99,613 | $133,819 |
| Cash at Beginning of Period | $0 | $16,710 | $90,188 | $158,957 | $258,570 |
| Cash at End of Period | $16,710 | $90,188 | $158,957 | $258,570 | $392,389 |
