The New Reality of Fund Management
Starting an investment fund for friends and family has traditionally been the domain of Wall Street veterans with deep pockets and expensive lawyers. That paradigm is shifting. With Hedgia's platform, launching a professional hedge fund structure for your inner circle now costs less than most people spend on coffee each month.
This guide walks through the entire process of creating a friends and family fund using Hedgia's streamlined platform—from initial concept to your first investor onboarding.
Why a Friends and Family Fund Makes Sense Now
The Economics Have Changed
Traditional hedge fund setup costs—$50,000 upfront plus $1,000+ monthly—made small funds economically impossible. At those rates, you'd need millions under management just to break even.
Hedgia's $30/user/month model (minimum of 3 users) fundamentally changes this math.
Professional Structure Builds Trust
When managing money for people you know personally, professionalism isn't optional—it's essential for preserving relationships.
- • Legally compliant fund structures
- • Automated monthly performance reports
- • Transparent fee calculations
- • Professional investor portals
Example Economics: $500,000 Fund
Managing $500,000 from 10 friends and family members with a modest 10% annual return and standard 2/20 fee structure:
- • Monthly management fee (2% annually): $833
- • Monthly performance fee (20% of gains): $833
- • Total monthly revenue: $1,666
- • Less Hedgia costs: $1,576 net profit
Phase 1: Pre-Launch Preparation
Define Your Investment Strategy
Before touching the platform, crystallize your approach:
- • What assets will you trade? (Stocks, bonds, crypto, alternatives)
- • What's your risk management framework?
- • How will you differentiate from index funds?
- • What's your target return profile?
Calculate Your Minimum Viable Fund
Friends and family funds typically start between $100,000-$1,000,000. Calculate your breakeven:
- • Hedgia costs: $30/user/month (minimum of 3 users)
- • Additional costs: Data feeds, trading platforms, accounting
- • Time investment: How many hours monthly?
- • Required AUM for sustainability
Identify Initial Investors
List potential investors in order of likelihood:
- 1. Immediate family with investment capital
- 2. Close friends who've expressed interest
- 3. Professional network members who know your expertise
- 4. Extended family with suitable risk tolerance
Phase 2: Platform Setup
Creating Your Structure in Illinois
1. Manager LLC Formation
- • You as the manager create this entity
- • Controls the fund's operations
- • Separates your personal liability
- • Cost: ~$150 in Illinois (after $250 rebate)
2. Fund LLC Creation
- • The investment vehicle itself
- • Receives investor capital
- • Managed by your Manager LLC
- • Cost: ~$150 in Illinois
3. Document Generation
Hedgia automatically creates:
- • Offering Circular: Details fund strategy, risks, manager background
- • Operating Agreement: Governance structure, fee arrangements
- • Subscription Agreements: Investor onboarding documents
These documents, worth $110,000+ traditionally, are included in your monthly subscription.
Phase 3: Operational Setup
Banking and Brokerage
Hedgia guides you through:
- • Opening fund bank accounts (qualify for $250 rebate)
- • Establishing brokerage relationships
- • Setting up proper fund flow structures
- • Implementing compliance controls
Fee Structure Design
Most friends and family funds use modified traditional structures:
- • Management fee: 0.5-1.5% (lower than institutional 2%)
- • Performance fee: 10-15% (lower than institutional 20%)
- • High-water mark provisions
- • Quarterly or annual crystallization
Investment Infrastructure
Establish your operational foundation:
- • Trading platform access
- • Market data subscriptions
- • Research tools and resources
- • Risk management systems
Phase 4: Investor Onboarding
The Conversation Framework
Approaching friends and family requires delicacy:
Start with Education
"I'm launching a professionally structured investment fund. Would you like to understand how it works?"
Present the Opportunity
- • Share your track record (personal or paper trading)
- • Explain your investment strategy simply
- • Show the professional infrastructure
- • Discuss fees transparently
Set Proper Expectations
- • Investment minimums ($25,000-$100,000 typical)
- • Liquidity terms (quarterly redemptions common)
- • Risk factors specific to your strategy
- • Reporting frequency and detail
Digital Onboarding Process
Hedgia streamlines investor entry:
- 1. Investors receive subscription documents digitally
- 2. Complete accreditation verification
- 3. Execute electronic signatures
- 4. Wire capital to fund accounts
- 5. Receive portal access immediately
Each investor gets 24/7 access to real-time performance data, monthly statements, tax documents, and direct messaging with you.
Phase 5: Launch and Early Operations
Month 1: Foundation
- • Complete final compliance checks
- • Receive initial capital contributions
- • Begin trading with small positions
- • Test all reporting systems
- • Send welcome communications to investors
Month 2-3: Establishing Rhythm
- • Scale to full position sizes
- • Generate first monthly report
- • Hold first investor update call
- • Refine operational processes
- • Gather investor feedback
Month 4-6: Optimization
- • Analyze performance attribution
- • Adjust strategy based on results
- • Prepare first quarterly letter
- • Consider accepting additional investors
- • Plan for tax season preparation
Critical Considerations for Friends and Family Funds
Relationship Preservation Strategies
Over-Communicate
- • Send weekly informal updates initially
- • Host quarterly video calls
- • Share your thinking process, not just results
- • Address concerns before they're voiced
Set Conservative Expectations
- • Under-promise on returns
- • Over-deliver on communication
- • Emphasize long-term thinking
- • Prepare investors for inevitable drawdowns
Scaling Intelligently
The Growth Timeline
- • Months 1-6: Prove the model with initial investors
- • Months 7-12: Add second wave from waiting list
- • Year 2: Consider expanding beyond friends and family
- • Year 3+: Evaluate institutional capital opportunities
When to Stop Taking Family Money
- • Maximum percentage from any single family: 20%
- • Maximum number of family investors: 10-15
- • Point where you transition to arms-length investors
- • AUM level requiring additional operational support
Maintain Professional Boundaries
- • Keep fund discussions separate from social gatherings
- • Don't offer different terms to different family members
- • Treat all investors equally in communications
- • Avoid discussing individual investor positions with others
The First 100 Days: A Practical Timeline
Days 1-10: Setup
- • Create LLC structures through Hedgia
- • Generate offering documents
- • Open bank accounts
Days 11-30: Preparation
- • Refine investment strategy documentation
- • Create initial marketing materials
- • Schedule conversations with potential investors
Days 31-60: Capital Raising
- • Conduct investor meetings
- • Process subscription agreements
- • Collect initial capital commitments
Days 61-75: Launch Preparation
- • Receive wire transfers
- • Set up trading systems
- • Test all operational processes
Days 76-100: Active Management
- • Begin trading operations
- • Generate first investor reports
- • Establish operational rhythm
Common Pitfalls and How to Avoid Them
❌ Mixing Personal and Fund Assets
Never commingle funds. Hedgia's structure enforces this separation, but maintain discipline in:
- • Expense allocation
- • Trading account access
- • Fee collection timing
❌ Informal Promises
Avoid verbal commitments about:
- • Guaranteed returns
- • Special liquidity terms
- • Preferential fee structures
- • Investment strategy changes
The Path Forward
Launching a friends and family fund through Hedgia removes traditional barriers while maintaining professional standards. The platform handles the complex infrastructure, letting you focus on what matters: generating returns for people who trust you.
Your Fund, Your Size
Whether you start with $50,000 or $500,000, Hedgia provides the same professional infrastructure. Build the fund that fits your situation and grow at your own pace.
The revolution isn't just in the technology—it's in the democratization of professional fund management. Your expertise, combined with Hedgia's infrastructure, can create value for your inner circle while building a sustainable investment business.
The question isn't whether you can launch a fund anymore. It's whether you're ready to take responsibility for managing money professionally. If you are, Hedgia makes the rest surprisingly simple.
This article is for educational purposes only and does not constitute legal, financial, or investment advice. Securities laws and regulations vary by jurisdiction. Consult qualified professionals before launching any investment fund.