To start a hedge fund, do I need to become a stock broker?

General
1

My friend had this question, if anyone can answer:

I wanted to ask a question. Is it possible to create a brokerage firm and hedge fund separately, I mean is it necessary that to create a hedge fund, I need to become a stock broker? Or I need to become a finanacial analyst?

2

Stock broker and Hedge fund are actually completely different.

The role of a broker is to facilitate a transaction, whereas a hedge fund manager has to manage the money raised by him.

So if I am an institution and you are my broker, I will call you and ask for a view, and I will also ask you to execute orders on my account. But these orders are what I ask you to place.

If I am an institution and you are a hedge fund manager, I will give you a few crores to manage and you work on percentage of profits earned as your commission. ( In India a hedge fund (AIF II) has to be minimum Rs 20 crores in AUM and each indivdiual/institution allocating capital, has to do atleast Rs 1 crore).

If the idea is to be a fund manager, it is best to look for job opportunities that involve coming up with trading and investment ideas. So it could technically be a job as financial/research analyst, a stock broker, or anything else. In this business, if you are good, you are automaticaly spotted and elevated.

3

Is their any education qualification required for starting hedge funds or required net worth and Assets Under management is only needed.

4

Setting up a Category 3 AIF, isn’t very easy. Check the below FAQ from SEBI

2 Likes
5

Hey @nithin
If you want to do this legally on smaller scale, ie trade with funds from family and friends. What is the the right way to do that?

6

There is no legal way to do this. Check this post

7

Very well written article @nithin , thanks for sharing.

8

No, you don’t need a broker because these two are different things. Though I would recommend you to learn it in a better way before actually hedging.