Supporting start-ups for long-term success
Anchin, Block & Anchin: Best Accounting Firm for Start-Up Funds – Start-up hedge funds should adopt best practices at the onset as this will help set them up for long-term success. Accounting firm Anchin, Block & Anchin focuses on supporting these nascent businesses and guides them through the process of setting themselves up for growth.
“Many of the funds we are engaged by are not initially subject to SEC registration as they’re below the $50m registration threshold. But we always advise them that if you want a viable business for the long-term, and not stay a US50 – USD75 million fund, you are eventually going to need to register with the SEC, so think and act like you are from the beginning. The popularity of Hedge Funds has waned so it’s crucial for them to adopt sound and best practices, policies and procedures from their inception to help them in the long-term,” explains Jeffrey Rosenthal (pictured), Partner and Leader of Anchin’s Financial Services Practice.
The firm advises clients as they implement their investment strategies utilising the most sophisticated financial vehicles, providing the appropriate accounting and tax advice to meet their needs. Anchin’s services include ensuring full compliance in financial reporting, minimising tax exposure, consulting on operations, structure and regulatory matters.
Many hedge fund start-ups are managed by professionals who have moved on from other funds. Rosenthal notes that most of these individuals have experience in managing successful portfolios but running a business is often new territory for them. A firm like Anchin helps them think through the cost, operational and structural side of things.
Rosenthal says: “This is what makes us different. We spend time up front with these managers to make sure they understand the implications of the decisions they make. Our objective is to reach more managers who view us as a value proposition, not simply as a commodity. We want clients who recognise that they are operating in a very challenging environment, and value our opinions, rather than just consider our firm a tax return or audit provider,” Rosenthal remarks.
The post-crisis environment has had a significant impact on this sector. Rosenthal acknowledges reaching critical mass is now much more difficult: “Pre-2008 we would on-board a significant number of start-up managers and in several years, a USD50 million dollar fund could become a USD500 million to a billion dollar fund. That was then, we don’t often see that level of growth anymore.”
“The success rate of managers has dwindled. If we were engaged by ten funds, pre-2008, seven of those would be doing fine and still growing four or five years down the road. Now it may be only two or three who succeed. It’s much more difficult for smaller managers to reach critical mass because few institutions and funds-of-funds want to invest in these smaller, start-up funds. They require a two to three year track record and a huge amount of infrastructure.”
He adds that in view of this, Anchin’s challenge lies in the industry producing more hedge fund managers who will achieve success. Although the firm invests a lot of time in smaller managers, it is ultimately those long-term relationships supported by growth which are mutually beneficial to the firm and its clients.
Rosenthal reveals that although the firm continues to see hedge fund start-ups it has also seen growth from launches in other areas. “We continue to work with many established and start-up hedge funds, and our practice is benefiting from an increased interest in real estate and private equity,” he comments.
Partner in Charge, Financial Services Practice, Anchin, Block & Anchin
Jeffrey I Rosenthal, CPA, CGMA is the Leader of Anchin’s Financial Services Practice. Jeffrey specialises in providing accounting, tax, and business advice to a wide array of financial services entities including broker/dealers, investment partnerships (domestic and offshore), funds-of-funds, mutual funds, private equity funds, and investment advisors. He has extensive experience advising newly formed entities and assisting with start-up considerations such as form of practice, structure of agreements, compensation arrangements, compliance, and regulatory matters.