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Simmons & Simmons helping to demystify the hedge fund start-up process

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Quite aptly, its design logo could be a leaf or a drop of water. Simmons & Simmons, one of the hedge fund industry’s leading law firms, has developed a new product LaunchPlus which provides the water needed for new hedge funds to flourish and grow; aqua vitae as it were. 

The online resource was officially unveiled on 17 June 2015 and has been designed to provide the next generation of managers with a convenient repository of information and guidance on how to set up a hedge fund, and, importantly, grow it over the long term. 

“We do legal products well. Simmons has the incredibly well known Navigator, which provides information on worldwide marketing requirements. We also do hedge funds very well. We therefore thought it would be a good opportunity to combine both strengths to provide the next generation of managers with a convenient format with which to access all of the tools they need to understand what is involved in embarking on establishing their own hedge fund management business,” explains Dev Saksena, Partner, Simmons & Simmons and one of the architects behind LaunchPlus.

Its launch comes at an opportune time. Start-ups have had a tough time the last few years given the sheer breadth and complexity of regulatory developments. Having a central resource that can act as a treasure trove of information is precisely what managers have been looking for; both new and established.

Anything that can help nurture the generation of managers by making the launch process more efficient, reducing costs by using technology in an innovative way, and packaging information together in a convenient manner should be welcomed. 

LaunchPlus is divided into four sections:

  • Get started
  • Launch
  • Operate 
  • Grow

The Get Started section is largely available to everyone and is not password protected. This section provides practical information on preparing an FCA application, understanding management structures, fund structures and employment-type issues if someone is dealing with an existing fund manager employer.

The remaining sections are exclusive to Simmons & Simmons’ start-up clients.

As Richard Perry, head of the firm’s Financial Services group, commented at the recent launch: “From working through structuring and domicile considerations through to helping a new manager plan the critical milestones for their launch, Simmons & Simmons LaunchPlus has the key information anyone setting up a hedge fund business needs.”

LaunchPlus helps managers in two distinct ways. First, it empowers them to have a discussion from an informed perspective; the content is written in a way that is very user-friendly, practical and free of legal jargon. 

Second, it has been designed in such a way as to make the launch process more time and cost efficient. 

“If we can do anything to help clients understand some of the basic issues, which would otherwise involve them spending money, then so much the better. The feedback we are getting is that it is very intuitive and user friendly and we hope it will help lower the barriers to entry. We think that leading hedge fund focussed firms like ours have a responsibility to help support the next generation of managers,” says Saksena. 

New managers need to be solid with their preparations – particularly before meeting prospective seeders – the better prepared they are to share their long term vision for the business the more credible they will seem. 

“I think that’s absolutely right,” states Saksena. “All too often, these are people who have never had to run a business before. They are used to trading, that’s their forte. Launching a fund management business is a significant challenge. Understanding what documentation needs to be in place, who prepares it, getting PB and fund administration agreements in place, what the key points are to consider if someone is looking to attract seed capital, what terms are generally agreed with seeders and so on. 

“We are trying to help managers understand all of these issues.”

With the introduction of AIFMD in Europe managers have to be crystal clear in terms of knowing the profile of potential investors as this will dictate whether to launch a European regulated AIF or a more established offshore Cayman fund, for example. 

One useful resource within LaunchPlus is a fund domicile comparison table; a simple idea but highly practical. 

“With this matrix the aim is to answer questions for managers that we are frequently asked during the launch process so that clients aren’t paying for things over and again. The point is we provide the information that helps people to deconstruct the process, demystify it and present everything in non-legalistic terms,” stresses Saksena.

Another useful tool is LaunchPlanner – effectively a project management tool to help managers understand the various legal and regulatory workstreams involved. The more planning that goes into this the smoother the processes should be. 

“It helps with their overall strategy. We speak to prospective managers often and it can be difficult for them to understand how everything fits together. There are lots of different processes and milestones that the LaunchPlanner covers: fund set-up process, management set-up process, seeding, marketing and trading documentation. In one page, LaunchPlanner helps a manager understand what they need to be thinking about and when, from a timing perspective. I think that is key to the success of any start-up fund management business,” adds Saksena.

Managers can also refer to a series of quick guides; short, easily digestible four-page guides that crystallise key content; essentially cheat sheets. “We will certainly expand these over time. Whatever we include must always be directly relevant to start-ups. That is our target going forward,” concludes Saksena.

Saksena confirms that the summer and autumn will involve a roadshow for LaunchPlus to the hedge fund community in London and New York.

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