Courage and Clarity: Taking Your Hedge Fund from Launch to Long-Term Growth
Starting and growing a successful hedge fund requires a rare blend of courage and clarity.
Emerging managers must summon the courage to believe in their investment ideas, win over investors, and launch their fund—often in the face of uncertainty. But clarity is just as important. Managers must possess the ability to map a hedge fund growth strategy and build an operation that can scale and thrive.
Whether you’re just starting or looking to take an early-stage fund to the next level, striking this balance can be an emerging manager’s greatest challenge.
In this blog post, we will take a closer look at some real-world operational challenges of emerging fund leaders and examine how the capabilities of modern technology can empower these managers to lead with both courage and clarity.
Learning from Experience: Emerging Hedge Fund Managers Share Their Biggest Obstacles to Growth
At a recent roundtable discussion during the HFM US Emerging Managers COO Summit, operational leaders from emerging hedge funds gathered to explore a central challenge: how to balance immediate operational demands with long-term growth goals.
Participants described feeling caught between the need to operate lean and the pressure to build infrastructure that meets institutional standards. From rising investor expectations to managing complex compliance requirements and deciding who to hire—and when—the obstacles can feel daunting.
To navigate these challenges, these emerging managers are increasingly turning to technology. They’re looking for solutions that can support today’s needs while retaining the scalability and interoperability needed to support the hedge funds’ growth strategy.
5 Strategies for Creating an Operational and Technical Infrastructure to Start and Grow a Successful Hedge Fund
We’ve compiled a list of key considerations emerging managers need to make to strike the right balance between immediate needs and long-term growth.
These insights are designed to guide your operational decision-making and keep your hedge fund on a steady, scalable path forward.
Build Your Hedge Fund Operations Around a Strategic Plan
When you launched your fund, you likely built a business plan outlining your investment strategy and long-term vision—where you wanted the fund to be in three, five, or even ten years.
Now it’s time to apply that same strategic thinking to your operations. Your operational plan should map out how your technology, systems and infrastructure will evolve to support the growth strategy you originally envisioned for your hedge fund.
Whether you're planning to expand into multiple asset classes, introduce more complex strategies, or serve a broader investor base, having a clear picture of your future firm helps you make smarter, more informed decisions today.
Think Strategically About Technology: Unite Front, Middle and Back Office Operations
In the early stages, it’s common for emerging funds to adopt software solutions on an as-needed basis. While this approach may solve immediate problems, it often leads to a fragmented tech stack that slows down workflows and increases operational risk.
Fortunately, today’s technology makes that patchwork approach obsolete. Emerging managers now have access to comprehensive platforms that unify the entire investment process—from the trading desk to the back office—creating a single source of truth across the organization.
Cloud-native solutions take this even further, offering greater agility, easier scalability, and lower infrastructure costs. By thinking strategically about your tech stack from the start, you can build an integrated, future-ready operation that grows as you do.
Secure the Right Resources at the Right Time
Beyond technology, human capital is one of the most critical considerations for emerging hedge funds. While it’s important to build a strong team to support growth, many funds hesitate to hire too many employees at the outset due to the associated costs.
Outsourcing technology and operational functions is an effective way to access the specialized resources you need without the overhead of building an entire internal team. By partnering with the right providers, funds can tap into experienced professionals who have worked at similar firms and are familiar with industry best practices and regulatory requirements.
As your hedge fund grows, co-sourcing offers another flexible solution. This model allows funds to handle certain workflows in-house while handing off other tasks to a trusted provider that integrates seamlessly with your team. Co-sourcing effectively extends your in-house capabilities without the added expense of full-time hires.
Plan for an Increasingly Complex Regulatory Landscape
Regulatory scrutiny is an unavoidable reality for all hedge funds, but emerging managers often face even more intense examination. The US Securities and Exchange Commission (SEC) regularly includes newer funds in its annual examination priorities, increasing the likelihood of regulatory audits.
During these exams, the SEC goes beyond just assessing performance metrics—it conducts a thorough review of a fund’s internal operations, scrutinizing systems, processes, and controls to ensure compliance and operational integrity.
For emerging hedge funds, modern technology solutions offer the infrastructure needed to meet these heightened expectations. Cloud-based platforms can streamline operations, bolster cybersecurity, and ensure transparent reporting.
By leveraging these capabilities, funds can not only comply with regulatory requirements but also demonstrate a proactive commitment to governance—something that resonates with both regulators and investors and supports the growth of your hedge fund.
Prepare for Increased Investor Due Diligence
Research from the Managed Funds Association (MFA), the trade association for the global alternative asset management industry, reveals that, in the US, institutional investors—such as pension funds, endowments, and foundations—now account for the vast majority of capital allocated to hedge funds.
These investors are especially sensitive to operational risks that are within a manager’s control, including compliance failures, weak cybersecurity, inconsistent reporting, and inadequate oversight. Such issues are seen as red flags, not only because they pose potential financial losses, but because they suggest gaps in a manager's overall governance and discipline.
For emerging managers, building investor trust goes beyond delivering strong returns. It requires establishing robust systems, clear processes, and a commitment to transparency from day one.
Growing Your Emerging Hedge Fund with the Right Technology
While it’s essential to address today’s challenges, the key to long-term success lies in building a clear, strategic vision for the future. Emerging funds must not only navigate current obstacles but also have the foresight to identify the technology, talent, and infrastructure that will fuel sustainable growth.
At SS&C, we’ve helped hundreds of hedge funds do just that—providing the technology and expertise they need to meet today’s demands and scale for tomorrow’s opportunities.
To learn more about how to lay the foundation for a successful hedge fund, download our whitepaper, “What to Know Before You Launch – A Guide for Emerging Hedge Fund Managers.”
