A Guide to Starting Your Hedge Fund

<p>Acknowledgements ix</p>
<p>PART I Why This Book? 1</p>
<p>Chapter 1 Introduction 3</p>
<p>Why This Book? 3</p>
<p>The Big Picture and Energy Commodities 4</p>
<p>Case Study: Amaranth Advisors 5</p>
<p>Layout 6</p>
<p>The Beginning 7</p>
<p>Bibliography 7</p>
<p>PART II The Basics 9</p>
<p>Chapter 2 What Is a Hedge Fund? 11</p>
<p>I Already Know What a Hedge Fund Is 11</p>
<p>A Little Bit of History 12</p>
<p>So What Is a Hedge Fund? 13</p>
<p>Hedge Funds (Un)Defined 16</p>
<p>The Growth of the Hedge Fund Industry 18</p>
<p>Hedge Fund + Commodities = Commodities Corporation 19</p>
<p>Whither Energy and Commodity Hedge Funds? 20</p>
<p>Moving Forward 20</p>
<p>Bibliography 21</p>
<p>Chapter 3 What Are Energy Commodities? 23</p>
<p>Introduction 23</p>
<p>What Are Energy Commodities? 23</p>
<p>The Regionality of Electricity 25</p>
<p>Why Are Energy Commodities Attractive for Investors? 27</p>
<p>A Complex, Solvable Problem 30</p>
<p>Drivers of Complexity 31</p>
<p>Conditions for Solvability 36</p>
<p>Principal Sources of Opportunity and Risk 39</p>
<p>Bibliography 46</p>
<p>Chapter 4 Trading and Investing in Energy Commodities 47</p>
<p>Bottom–up and Top–down 48</p>
<p>Trading + Managing a Business = Successful Hedge Fund 49</p>
<p>The Edge? 50</p>
<p>Trading Energy Commodities 52</p>
<p>Basic Financial Knowledge for Commodities 55</p>
<p>Conclusion 56</p>
<p>Bibliography 59</p>
<p>Part III Starting the Journey 61</p>
<p>Chapter 5 The Business Plan: Implications and Applications 63</p>
<p>Introduction 63</p>
<p>Objectives and Uses of a Hedge Fund Business Plan 64</p>
<p>Conclusion 71</p>
<p>Bibliography 72</p>
<p>Chapter 6 Laws, Contracts, and Lawyers 73</p>
<p>Don t Kill Your Lawyer 73</p>
<p>Legal Basics for Funds 74</p>
<p>Master Feeder Fund Structures 77</p>
<p>Side–Pocket Structures 81</p>
<p>The Firm 84</p>
<p>The Investment Advisory Agreement 86</p>
<p>Management Enterprise 87</p>
<p>Structural Design Decisions 88</p>
<p>Case Study: Complex Tax Structuring 98</p>
<p>Be Nice To Your Lawyer 103</p>
<p>Bibliography 104</p>
<p>Chapter 7 Service Providers 105</p>
<p>Introduction 105</p>
<p>Long–Term Relationship: Service Providers and Marriage 106</p>
<p>Service Providers: Who and Where? 107</p>
<p>Negotiate, Negotiate, Negotiate 108</p>
<p>Service? 110</p>
<p>How to Choose? 112</p>
<p>Final Thoughts 113</p>
<p>Bibliography 113</p>
<p>PART IV Running the Business 115</p>
<p>Chapter 8 Fundraising 117</p>
<p>Strategic Investor Portfolio Design 118</p>
<p>Start–up Lifecycle Analysis and Investor</p>
<p>Portfolio Development 127</p>
<p>Investor Acquisition Marketing 130</p>
<p>Tools for Marketing and Key Marketing Documents 140</p>
<p>Marketing Documentation 143</p>
<p>Investor Maintenance Investor Relations 152</p>
<p>Chapter 9 Operations and Infrastructure 155</p>
<p>Introduction 155</p>
<p>Infrastructure and Technology 158</p>
<p>Bibliography 160</p>
<p>PART V Final Thoughts 161</p>
<p>Chapter 10 Investing in Energy Commodity Hedge Funds 163</p>
<p>Asset Allocation: Portfolio Building Basics 163</p>
<p>Asset Allocation: Understanding Different Strategies 167</p>
<p>Checklist for Investing in Energy Commodity</p>
<p>Hedge Funds 170</p>
<p>Bibliography 171</p>
<p>Chapter 11 Quo Vadis 173</p>
<p>Bibliography 179</p>
<p>Appendix A Sample Business Plan Outline 181</p>
<p>Appendix B Outline of a Confidential Explanatory Memorandum: Sample Offshore Feeder Ltd 183</p>
<p>Appendix C Sample Due Diligence Questionnaire Outline 189</p>
<p>Index 195</p>