Let’s look at the 2 words separately.
What does the term hedge fund mean? Basically, hedge fund is a fancy word for a partnership
One way to think of the partners is as investors in your fund
We will get more into different types of investors a little later.
Now let’s look at the term incubator hedge fund. Why would you want to setup an incubator hedge fund? What is the purpose?
There are a couple of reasons:
1st: It helps you create a separate track record outside of your own personal performance trading record
2nd: Many investors may not look at your personal trading track record because it might be difficult to audit
This makes it difficult to market your own personal performance record to investors
So, what an incubator hedge fund does, is that it creates a new entity (legal entity) that is outside of your own personal self that would have a separate track record of its own.
Let’s say that you have been trading for a years and you had some years with losses, but you learned from them and created a new trading system.
Even though you learned from your trading mistakes and created a new system, you would still have to show the losses
The new entity creates a clean slate so that you can start from scratch with the new trading system you created.
There would be no question from the investors that you only included the stocks that had the gains and not the ones with losses.
We can reset the clock to zero and create a clean slate from your personal trading record and start all over again with the new incubator hedge fund entity.
We will get into costs a little later, but it is also much cheaper and cost effective to setup an incubator hedge fund than a full-fledged fund
Again, you can test your strategy and create a separate trading track record from your own personal trading track record.
Listen to the latest incubator hedge fund episode https://anchor.fm/incubatorhedgefund and you can visit https://incubatorhedgefundpodcast.com/ or take the incubator hedge fund setup course at https://www.udemy.com/course/hedge-fund-startup/