What is perhaps different to today’s start-up manager as compared to five years ago is the need to launch with greater amounts of capital. Moreover, they are doing so with a greater awareness of the need to adopt best practices from day one to stand a chance of attracting institutional dollars.
This trend plays to the strengths of firms like Anchin Block & Anchin.
“Many managers who don’t have to register with the SEC from the outset (provided they have less than USD150m of gross assets) are adopting a best practice approach and essentially running their business as if they were already under SEC scrutiny,” says Jeffrey Rosenthal (pictured), CPA, Partner-in-Charge of Anchin’s Financial Services Group.
With a staff of more than 350 and numerous specialised industry and service teams, Anchin is a full-service accounting, tax and advisory firm.
The Financial Services Group launched more than 35 years ago and includes ten partners and more than 50 dedicated professionals. It works with over 350 hedge funds, mutual funds, private equity funds, funds-of-funds, master-feeder funds, broker/dealers and family offices. Financial Services is Anchin’s largest industry practice.
Managers who have strong internal policies and procedures in place are more likely to catch and keep the attention of investors. And as Rosenthal comments, one of the consequences of this is that Anchin continues to attract smaller managers who understand the benefits of hiring good service professionals.
“Most of these guys know how to trade but that’s really it. They’ve never dealt with compliance, with employees and a lot have never even dealt with investors. We are good partners for start-ups. We help them understand all the processes they need to undertake and ultimately decide whether they want to still go ahead and launch a hedge fund. It’s a matter of us making sure they are well informed.
“We may say to a potential start-up manager that now may not be the optimal time to launch. That it may be better for them to trade on their own, develop a track record and then think about establishing a fund. The compliance burden becomes even more onerous once they have to register with the SEC. They need to be prepared for that,” says Rosenthal.
Under the gaze of global regulators it is vital that managers establish a clear audit trail and document completely the way their hedge fund operates. If the SEC or FCA were to come knocking on their door, managers have to be able to evidence why certain questions were answered in a certain way in their regulatory filings.
“It really is so important to document everything. What are your policies and procedures? How are they documented? If you are trading illiquid securities how exactly are they being valued? Is it a consistent process? Are you complying with custody rules?
“Such things tend to be overlooked by new managers. If they launch with USD1bn they can create an optimal infrastructure. They have nothing to worry about. But if a manager is launching with USD100m they don’t have that luxury,” says Rosenthal.
Satisfaction at Anchin comes from helping fund managers get the best out of their business and succeed over the long-term.
Anchin have now won the Hedgeweek award for the fourth year in succession. Comments Rosenthal: “We appreciate the recognition from our clients and friends in the industry. Our commitment and dedication truly pays off.”