launching a hedge fund in 2013: why it's easier this time around

Launching a Hedge Fund: Why It’s Easier This Time Around

Key Focus AreasSetting the Market Landscape

Getting Started– Upfront Planning– Organizational/Document Needs– Operational Matters

Technology To-Do List– Infrastructure: Cloud vs. On-Premise– Services & Solutions– Common Technology Mistakes

Key Considerations for Hedge Fund Formation

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered

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Key Stages of Formation

Upfront Planning

Organizational Matters and Documentation

Operational Matters and Infrastructure

Ongoing Activities

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered

trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 22048NSS MREP03

Upfront Planning

Geographical Jurisdiction (Tax Implications)

What Form will Advisor, fund vehicles take? (LLC, LP, Inc.)

US SEC Registration of Advisor?

What type of Governance model to employ?

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered

trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 22048NSS MREP03

Organizational Matters & Documentation

Drafting of PPMs, Organizational Agreements (LPAs, LLCAs)

Key Elements of Considerationo Investment Strategies, Restrictions, and Limitationso Powers, Authorities & Rights, Durationso Treatment of Organizational and Offering Costso Valuation of Investmentso Capital, P&L Allocation to Investorso Management Fee, and Incentive Fee Prescriptiono Timing and Frequency of Financial Reportingo NAV determination and Frequency

Involvement of & Consultation with Legal Counsel & Accountants is Critical during this stage of Fund Formation.

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered

trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 22048NSS MREP03

Operational Matters & Infrastructure

o Internalized Functionality or Outsourced Functionalitieso CCO and CFO Functionalities

o SEC and CFTC Complianceo Custody Rule Complianceo Registration Forms – Preparation and Executiono Form PF, CPO-PQR

o Vendor Relationships o Fund Administrationo Attorney Firmo IT Infrastructure and Connectivity (Security, Hardware vs. Cloud,

Disaster Recovery)o Audit and Taxo Custodians and Prime Brokerage

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered

trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 22048NSS MREP03

Operational Matters & Infrastructure (cont.)

ISDA Agreements & NegotiationsRisk Management Functionality

Risk Reporting and MonitoringSegregation of Duties

Human Resources and AdministrationEmployer RegistrationPayroll ManagementA/R and A/PCorporate Credit – Employee Expenses, Policies and Tracking

© 2010 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. KPMG and the KPMG logo are registered

trademarks of KPMG International Cooperative (“KPMG International”), a Swiss entity. 22048NSS MREP03

Ongoing Activities

Regular Meetings - Adoption of Organizational Changes and Amendments to AgreementsInvestment Valuation ProtocolsDelegation of Authorities – Renewals, TerminationsOngoing Compliance and Risk MonitoringAnnual AuditMock SEC ExaminationsVendor Due Diligence ReviewsRegistration Renewals

Launching a Hedge Fund: Technology To-Do List

Investment firms can choose from on-premise solutions or public, hybrid or private cloud services.

Technology Infrastructure

The Cloud

On-Premise Installation

Private Cloud Services

Public Cloud

Hybrid Cloud

On-Premise vs. Cloud Infrastructures

Traditional Installation Cloud Service

Delivery On-Site Fully Managed & Hosted

Turnaround 4-6 weeks < 3 weeks

PricingPerpetual OS/Application Licensing + Maintenance

Subscription (All Inclusive)

Cost AllocationCapitalized (Upfront)

Expensed (Over Time)

Additional Costs

CustomizationUpdates/Upgrades

MaintenanceOn-Going Support

Additional Users & Resources Desktop Support

Platform Multi-Applications & OS

Updates Larger – Frequent - Ubiquitous Shorter – Invisible - Defined

Cloud Computing ConsiderationsCloud Computing Considerations

Cost of Ownership

Control

Speed

Security

Availability

Scalability/Flexibility

Systems Integration

Additional Infrastructure Options

With an on-premise technology solution, your firm has two options:– Build and maintain your own Communications Room– Host your infrastructure in our data center(s)

Infrastructure security layers should include:

Firewall Client Site Router

ISP Edge Router

Desktop Server LAN

Real Estate Options

Determine spacing needs

Explore options– Executive Suites– Hedge Fund Hotels– Sublease– Independent commercial

office space

Office Facilities

Disaster Recovery & Business Continuity Planning

Disaster Recovery ObjectivesDisaster Recovery ObjectivesRecovery Point Objective (RPO)– The point in time to

which you must recover data as defined by your organization

Recovery Time Objective (RTO)– The duration of time

within which a business process must be restored after a disaster

Five Steps to Business Continuity PlanningFive Steps to Business Continuity Planning

BCP Life

Cycle

Compliance & Archiving

Retain emails and IMs for prescribed amount of time by law

Store data in WORM format

Allow for searchable indexing of files

Technology BudgetEnterprise Infrastructure - Data + Networking Year 1 Year 2

Hardware and Software    

Email, IM & Bloomberg Archival    

Project Labor    

Total Enterprise Infrastructure - Hardware    

Enterprise Infrastructure - Voice Year 1 Year 2

Avaya Voice Hardware & Labor    

Total Enterprise Infrastructure - Voice    

Enterprise Infrastructure - 3rd Party Services Year 1 Year 2

Central Copier - Multifunctional Copier    

Blackberry Voice & Data Service    

Bloomberg Users    

Verizon PRI Usage Including Taxes    

Total Enterprise Infrastructure - Services    

Enterprise Infrastructure - Circuits Year 1 Year 2

ISP A    

ISP B    

ISP 1 - PRI    

ISP 2 - POTS    

Bloomberg Circuit    

Total Enterprise Infrastructure - Circuits    

Additional Services Year 1 Year 2

Disaster Recovery    

Monthly Service    

Total Enterprise Infrastructure - Misc.    

TOTAL EXPENDITURE    

Common Technology Mistakes

Looking for the perfect solution

Insufficient planning for the future

Underestimating technology dependencies

Overestimating your capacity to manage technology

Shortchanging the training options and resources

…. and how to Avoid them

Why Is It Easier to Start a Hedge Fund?Cloud computing solutions have enabled a startup to deliver enterprise services day one.

The ongoing institutionalization of a hedge fund can be achieved utilized cloud solutions.

2012 saw intense competition for institutional dollars. We see that trend continuing in 2013 as changing technologies continue to enable the small startup fund to compete with the larger institutional one.

Eze Castle Integration OverviewEze Castle Integration Overview

Founded 1995

Headquarters

Additional Offices

260 Franklin Street, 12th Floor, Boston, Massachusetts, 02110

Chicago, Dallas, Geneva, Hong Kong, London, Los Angeles, Minneapolis, New York City, San Francisco, Singapore and Stamford

Core Services

• Strategic IT Consulting• Outsourced IT Solutions• Professional Services• Project & Technology Management• Communications Solutions• Network Design & Management• Internet Service

• Private Cloud Services• Business Continuity Planning• Disaster Recovery• Compliance Solutions• Storage Solutions• Colocation Services• E-Mail & IM Archiving

Awards Received

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