Want to start a profitable hedge fund management company in Nigeria?
Looking to set up a company that manages other people’s assets and capital?
Then you need to become a fund manager with the requisite experience, expertise, and network.
Hedge funds are mostly known as investment companies and sometimes trustees that advise, plan, and invest other people’s funds for profit and capital preservation.
In this post, we’ll look at what it takes to set up a hedge fund in Nigeria and how you can go about it.
Let’s get right to it.
Acquire Requisite Educational and Work Experience
Regulations stipulate that only those trained and certified in the finance sector are able to operate as fund managers.
That means to start a hedge fund, you’ll have to get some form of educational training in finance either via university education or job learning.
Required skills include:
- Business Administration
Grow Your Business Network
Starting a hedge fund requires having a vast network in the industry.
This is because you would need a lot of support in terms of raising funds, building partnerships, and meeting regulatory benchmarks.
To grow your network in the industry mostly requires that you have some working experience in the finance industry.
You’ll have to know how fund managers work, the sector associations to work with, and how to get deals through.
Most hedge funds in Nigeria today are not standalone. They work with other funds in order to create a more comprehensive bouquet of investment options for their customers.
Create a Comprehensive Business Plan
One of the most basic requirements for starting a hedge fund in Nigeria, especially from the SEC, is having a comprehensive business plan.
This business plan would usually detail the people involved in the company, their partners, their startup capital, and how they intend to operate such a fund.
Hence, this is usually the first document any serious person or group looking to start a hedge fund should have.
Raise The Required Capital For a Fund Management Company
A hedge fund is not a type of business that can be started by just anybody. It is a very expensive business that is built on trust.
Usually, it is a business of the rich and high net worth individuals.
Hence, there is a need to have the required startup capital to show both the regulatory bodies and your potential partners that you are capable of handling the huge deposits that are expected.
In fact, the SEC requires a minimum paid up capital of 150 million naira in the bank, as proof of readiness.
However, you can always pull this fund from partners and associates.
Starting a hedge fund in Nigeria would cost you at least 50 million naira in personal funds, with 30 million naira going towards an insurance bond, and the remaining 20 million naira going towards setup fees and other miscellaneous expenses.
Register The Company With The Corporate Affairs Commission
Once you have the aforementioned requirements, you can then proceed to register the company with the Corporate Affairs Commission (CAC).
If you have partners or investors, then you will need to have a memorandum of association and other agreements tendered with your CAC application.
Register With The Securities Exchange Commission
Meeting the requirements of the SEC is a very important step of setting up a legal hedge fund in Nigeria.
There are a few hedge funds in Nigeria that are set up without meeting the SEC requirements or even registering with the SEC.
But it’s only a matter of time before the long arm of the law catches up with them.
The SEC have a list of requirements for hedge fund management companies looking to operate in Nigeria.
Firstly, you will have to fill the SEC application forms and pay All the associated application, filing and processing fees.
- SEC 3 Form – for the company
- SEC 2 Form – for sponsored individuals and a compliance officer
- SEC 2 Form – for Directors of the company
Other required documents include CVs of the directors, means of identification, police clearance report, bank account statement, etc.
To see the full list of requirements, go to the SEC fund manager registration check list.
Create A Talented Marketing Team
After registering your hedge fund management company with the CAC and the SEC, you are set to start business.
The next step is to create a talented marketing team to manage the branding, advertising, customer acquisition, and business development needs of the fund.
You could also leverage the growing Fintech and DeFi trends in your customer acquisition efforts by creating a tech department to deploy technology applications for selling your products.
Launch Your Hedge Fund
Once you are set with all the regulatory compliance and team building, you can then launch your hedge fund.
Most hedge funds in Nigeria have names with suffixes such as capital, capital management, or investment.
So, your hedge fund could have names such as:
- XYZ Capital Limited
- XYZ Capital Management Limited
- XYZ Investment Limited
Once you have a brand name for your hedge fund, you can then begin operations and start soliciting investments from the general public.