When investors think of hedge funds, they picture the bustling streets of New York City. They may also think of London, Chicago, or the growing community in Florida. But while many hedge funds have thrived in those locations, you don’t have to move to one of those cities in order to make it big.
“Obviously the vast majority are located in New York, London, or Chicago,” said Nathan Anderson, co-founder and CEO of ClaritySpring, a company that aims to bring efficiency and transparency to the hedge fund industry. “But I don’t think people need to pack up and move to New York to start a hedge fund. It’s a business that you can run from just about anywhere.”
Anderson said that the location ultimately comes down to strategy.
“The reason there are so many hedge funds in Connecticut is because they’re right down the street from their investors,” he said. “If there’s a wealthy family or cluster of high-net worth individuals that are your core client base, you want to stay as close to them as possible. If that means that there’s a group of clients out in Detroit, then stay close to them. If you’re a hedge fund running $50 million to $100 million for a family office based in Iowa, then you want to be out in the cornfields. I think that’s really what it boils down to.”
Anderson also said that hedge fund managers need “sound infrastructure that’s reliable and phone lines and Internet connections and a place that’s not prone to too many natural disasters.” Those things can be obtained almost anywhere.
Many hedge fund experts recommend that aspiring managers look to their family and friends for help, primarily for their initial investments. But they are not your only options.
“Tap into the community you live in and be part of that community,” said Anderson. “As a prospective hedge fund manager, you are presumably a financial expert. Those are skills that can be helpful for different charities, different non-profits, and as you tap into those organizations, a lot of time there are potential investors associated with that.”
Many aspiring managers join the boards of other firms, get involved with various investment communities, and do whatever they can to gain exposure.
“I think there’s dual motive there,” said Anderson. “Obviously there’s the philanthropic motive. In addition, it’s access to a different network — a different constituency and potential investors.
“Again, there [are] the events where high-net worth individuals tend to hang out, whether that be places in The Hamptons over the summer, or going to charity events or that sort of thing. To some extent it helps to have some money to be able to make money because a lot of these events are either costly or have some kind of barrier to entry. But volunteering for an organization does not have a cost.”
Charities are just the beginning.
“Get involved with the Chamber of Commerce,” Anderson added. “Through that there’s a network of business people and wealthy individuals. Some of my clients have signed up for different clubs around the city.
“Another is the alumni networks at schools. Most schools have databases of former alumni who have basically made it and have built businesses or established themselves. There’s a connection there. Think through your personal life and the community and what kind of a prospect those provide you.”
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