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Fund managers, like lawyers or advertising executives, are constantly branching off from large companies to form smaller independent ones; the big difference in finance is that, often, this isn’t a direct competition to the old firm. Lawyers who leave a law firm to start their own will be directly competing with their old firm for new clients; a new fund manager, however, may start by investing money that the previous firm has given to the new fund manager to start investing.

In this sense, the new fund manager’s relationship to the old one is less adversarial than in other industries, which is a positive. At the same time, starting a new fund clearly depends on pre-existing relationships and access to capital; this is the negative, especially for new entrants to the industry.

So how exactly is a fund launched?

To begin, one must choose the fund to be launched. There are unit investment trusts, managed accounts, and hedge funds. These, for the most part, are limited to professional investors and usually launch only with funds managed from a large seed. A good example would be the “Tiger cub” group of hedge funds: a few dozen funds launched by Julian Robertson, one of the first hedge fund managers on Earth whose Tiger Management Group shut in 2000. However, Julian funded a great deal of his managers who started their own firms—these use a collection of private accounts to manage Robertson’s money alongside the money of other investors.

Those who want to go public can choose mutual funds, exchange-traded funds, closed-end funds, business development corporations, master-limited partnerships, or (again) unit investment trusts. The fund format will largely be dictated by the asset class you will be investing in, your fund management style, and your target audience. An actively-managed municipal bond fund will likely choose a CEF format; a smart-beta value equity fund will probably be an ETF.

After you’ve chosen your fund format, you need to hire lawyers to ensure you’re opening according to the law. Also, your fund managers will need to have certain Series certifications and you will need to ensure they don’t have any conflicting interests. If you’ve chosen a path to attract funds from the general public, i.e. an ETF or a CEF, you’re going to need to hire a marketing team to promote your funds to the broader public.

As you can tell, the startup hurdles for opening a fund, even if you aren’t accessing pre-existing capital, are pretty severe. This is why the vast majority of the buy side analysts who start up funds have a pre-existing network of investors who believe in them and want to help the analyst get set up.

There is also the issue of profitability. A good rule of thumb for an ETF is that it needs $500 million in assets under management to be profitable. For other types of funds, the number will vary tremendously upon a variety of factors, but will typically be quite large. The main takeaway: there’s no such thing as a startup fund; fund managers begin by making connections and building up a large base of qualifications, certifications, connections, and experience that will make success more likely. If your goal is to be a fund manager, you need to find a path to that end instead of starting up with the hopes of launching a fund straight out of college.