Can a single person run a hedge fund? — Can a single person run a hedge fund?

Quick answer: can one person run a hedge fund?

Short summary answer: how do you start a hedge fund

Yes, a single person can operate a hedge fund in 2026, but doing so means meeting regulatory and operational responsibilities that depend on the fund structure and investor type. A pooled private fund run by one manager can still trigger adviser registration and private fund reporting obligations under U.S. rules, which affect how you prepare before accepting outside capital Form ADV

Practically, most solo founders retain investment decision authority while outsourcing administration, custody and investor reporting to third parties so they meet investor expectations and regulatory recordkeeping needs Dechert guide to starting a hedge fund

When a solo manager must register or report

Whether a solo manager must register as an investment adviser depends on the Investment Advisers Act triggers and any available exemptions, and many of those rules focus on pooled private funds and client types Form ADV

Private fund advisers that meet asset thresholds or other criteria may also have to file private fund reports under Form PF, a requirement that has attracted renewed attention after recent amendments to private fund reporting Form PF

What is a hedge fund and common legal structures

Pooled funds vs separately managed accounts

In common usage, hedge fund refers to an actively managed pooled private fund that takes investment positions for a group of investors, typically organized as a limited partnership or an LLC that holds the fund assets. Pooled funds collect capital from multiple investors and then the manager allocates that capital according to the fund strategy Dechert guide to starting a hedge fund

A separately managed account or SMA is a different model where the manager runs distinct accounts owned by individual investors and often uses account level contracts rather than pooled ownership; SMAs can reduce some pooled-fund reporting obligations but create other operational and custody considerations AIMA emerging manager guide

Onshore and offshore vehicles explained

Legal vehicles range from an onshore limited partnership or LLC that accepts accredited US investors to offshore feeder structures that can accept non US or tax sensitive capital; the choice affects tax treatment, investor eligibility and the regulatory filings you must prepare Dechert guide to starting a hedge fund

For a solo founder the tradeoff is usually complexity versus flexibility: pooled offshore arrangements add setup and ongoing compliance but can broaden investor access, while SMAs or onshore funds may be simpler for a small investor base but still require careful documentation and service contracts AIMA emerging manager guide

Key U.S. regulatory requirements for solo managers

When to register as an investment adviser

Under U.S. law, registration under the Investment Advisers Act depends on the adviser s client base, assets under management and whether any exemption applies; managers of pooled private funds often need to evaluate these triggers early in the planning process Form ADV

For solo managers running pooled funds, private fund reporting and related disclosure obligations are central to compliance planning because they affect filing obligations and the level of operational recordkeeping required Form PF

How Form ADV and Form PF affect a solo launch

What Form ADV asks for

Form ADV is the basic registration and disclosure form for investment advisers and it collects information about the adviser s business, ownership, clients and conflicts of interest; completing it accurately is an early, non negotiable compliance step for advisers who must register Form ADV

Filing Form ADV also establishes a public record that many counterparties will review during due diligence, so the form s accuracy and the supporting policies you maintain will affect administrator and prime broker onboarding conversations Dechert guide to starting a hedge fund

Recent Form PF amendments and timelines

Form PF has been updated recently and those amendments extended compliance timelines into 2026, which means new private fund managers should factor private fund data reporting into their recordkeeping and operations planning from day one Form PF and the SEC has published the related rule text about those amendments Form PF amendments rule text

Operationally, Form PF reporting increases the need for consistent valuation and portfolio recordkeeping, so solo managers should consider whether outsourced administrators and middle office providers can produce the required data reliably. Industry commentary on the extended compliance timeline is available from law firms that track the rulemaking Mayer Brown analysis and regulators coordinated the extension with the CFTC CFTC press release.

Operational setup: outsourcing fund administration and services

Typical vendors solo managers use

Solo founders commonly rely on a set of third party vendors to handle functions they cannot or should not perform alone, including a fund administrator for NAV and reporting, an auditor for annual financials and legal counsel for documentation AIMA emerging manager guide

A prime broker or custodian is often needed to provide custody and execution services, and these providers will review your operational setup, audited financials and compliance policies before agreeing to onboard a solo run fund Dechert guide to starting a hedge fund

Which functions are commonly outsourced

Typical outsourced functions include NAV calculation and investor statements, trade settlement and reconciliation, tax reporting and independent valuation support, which let a solo manager focus on investment decisions while meeting documentation needs AIMA emerging manager guide

Outsourcing does not remove regulatory responsibilities: the manager remains responsible for compliance, and service agreements should clearly allocate tasks and reporting chains between the manager and vendors Dechert guide to starting a hedge fund

Choosing the right legal structure and documenting service contracts

Factors that determine onshore vs offshore

Choice of an onshore versus offshore vehicle depends on investor location, tax considerations, expected investor types and the regulatory reporting profile you want to manage; each choice affects admission requirements and operational complexity Dechert guide to starting a hedge fund

Solo founders often weigh the added setup and maintenance costs of offshore feeders against the potential to access non US capital, and that decision should be made with securities and tax counsel involved AIMA emerging manager guide

What to include in service provider agreements

Service agreements should define deliverables, timelines, data formats, confidentiality, liability limits and termination terms so you have a clear contract if disputes or service failures occur; auditors and administrators will expect these terms to be documented Dechert guide to starting a hedge fund

In addition, include provisions for data access and escalation paths in the event of regulatory inquiries, because prompt evidence and reconciliations are often needed during examinations or third party due diligence AIMA emerging manager guide

Capital, track record and prime broker expectations for solo founders

No universal statutory minimum, but market expectations exist

There is no single federal statutory minimum capital to form a hedge fund, but prime brokers, institutional allocators and seed investors typically expect managers to have seed capital, audited financials or credible operational infrastructure before onboarding or allocating capital Preqin hedge fund launch report

For many solo founders this means planning for a staged launch: use personal capital or a seed investor to cover setup and initial operating costs while building an audited track record that supports future allocations AIMA emerging manager guide

Before you proceed, reflect on whether you have the operational capital and documented track record needed to satisfy prime brokers or potential allocators, or whether you need a seed arrangement to bridge the gap Preqin hedge fund launch report

Ways to demonstrate operational credibility

Credibility can be shown through audited financials, clear compliance policies, contracts with established administrators and custody providers, and initial capital that covers both operating costs and potential liquidity needs Dechert guide to starting a hedge fund

Some managers use incubator programs or seed arrangements with a small number of investors to build an audited track record before seeking prime brokerage or institutional allocations Preqin hedge fund launch report

Startup compliance checklist every solo manager should follow

Required policies and programs

At a minimum, assemble written compliance policies, a compliance manual, an AML and KYC program, a valuation policy and a business continuity plan as foundational documents that support filings and third party due diligence Form ADV

These policies will be referenced in adviser registration and can be requested by administrators, auditors or prime brokers during onboarding, so prepare them before you sign service agreements Dechert guide to starting a hedge fund

Filing and auditor steps

Assess whether you must register on Form ADV and whether Form PF reporting will apply; if filings are required, set timelines to prepare the required disclosures and supporting records well ahead of any capital raise Form PF

Engage an auditor early so annual financial statement timing matches investor and prime broker expectations, and document custody arrangements to show asset segregation and independent oversight Form ADV

Common mistakes and pitfalls to avoid

Underestimating operating costs and timelines

One frequent mistake is underestimating the operational costs and timelines for vendor onboarding, audits and regulatory filings; these costs can outstrip early revenue if not planned for and can delay prime broker or administrator acceptance AIMA emerging manager guide

Another common pitfall is assuming outsourcing removes regulatory responsibility; regulators and counterparties expect documented policies and evidence of oversight even when functions are delegated to vendors Dechert guide to starting a hedge fund

Ignoring reporting or poor documentation

Failing to document compliance programs, KYC processes or valuation methods can cause operational delays and raise questions during due diligence or regulatory review, so maintain organized records and version control for core policies Form PF

Do vendor due diligence early, and keep clear contracts that spell out responsibilities, deliverables and data access to reduce disputes and gaps in reporting during examinations Dechert guide to starting a hedge fund

Step-by-step launch roadmap for a solo founder

Pre-launch: legal and operational planning

Step 1, decide your vehicle: pooled fund or SMA, and whether you will accept onshore or offshore capital; this shapes your registration and tax considerations and starts the conversation with counsel Dechert guide to starting a hedge fund

Step 2, hire securities counsel and draft core documents, including the limited partnership agreement or SMA contract, subscription materials and your initial compliance manual and AML policies AIMA emerging manager guide

Launch: filings, service agreements, investor onboarding

Step 3, sign service agreements with a fund administrator, auditor and custodian or prime broker and confirm their admission criteria and turnaround times for onboarding Dechert guide to starting a hedge fund

Two practical scenarios: pooled fund versus separately managed account

Pros and cons for a solo manager

Pooled fund pros include the ability to aggregate capital and run a single strategy across investors; cons include pooled fund reporting obligations and potentially higher initial setup costs for auditors and administrators AIMA emerging manager guide

Separately managed accounts can simplify some reporting and provide customizable client arrangements, but they may increase custody complexity and reduce the ability to deploy a single unified strategy across pooled assets Dechert guide to starting a hedge fund

How reporting and investor acceptance differ

Pooled funds are more likely to trigger Form PF and pooled fund style reporting, while SMAs may rely on client level disclosures and individual account documentation; investor acceptance criteria and prime broker requirements can vary substantially between the two options Form PF

Family office or other exemption pathways may be relevant for some solo managers but require careful evaluation because exemptions narrow available investor types and do not remove all operational responsibilities Investment Advisers Act of 1940

Ongoing obligations, scaling and what changes once AUM grows

Reporting cadence and audit cycles

Once AUM grows, reporting cadence, audit expectations and regulatory scrutiny typically increase, and Form PF filing frequency and depth can change depending on the size and type of private fund advisory business Form PF

Scaling also means revisiting vendor SLAs, hiring or outsourcing middle office staff and preparing for more frequent investor reporting and potential operational audits from counterparties Preqin hedge fund launch report

When operational upgrades are needed

Upgrade triggers include reaching thresholds for Form PF, needing daily NAV capabilities for larger investor bases, or encountering allocator requests for bespoke reporting; at those points add staff or more robust vendor contracts to maintain controls and timeliness Dechert guide to starting a hedge fund

Continue to document changes to your structure and ensure filings and service agreements reflect the current operational model so regulators and counterparties see consistent records Form ADV

Final checklist and practical next steps

Who to talk to next

Talk to securities counsel, an experienced fund administrator and an auditor early in the planning process to confirm the vehicle choice, expected timelines and documentation needs before you take investor money Dechert guide to starting a hedge fund and review recent investing guidance on our investing category.

Confirm prime broker and administrator admission criteria and have a written plan for AML/KYC, valuation and investor reporting that you can show during onboarding conversations AIMA emerging manager guide

Quick verification steps before launch

Verify whether you must register on Form ADV, whether Form PF reporting will apply, confirm your auditor and ensure your service agreements allocate responsibilities clearly Form ADV

Use the checklist and vendor confirmations to document decisions and keep copies of primary sources, vendor onboarding emails and executed contracts for future reference. See suggested business banking options on our site best business bank accounts and visit the Finance Police homepage for more resources.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.