This article was originally published on Oct. 5, 2014, and updated on May 4, 2016.

George Soros has a net worth of $24.9 billion. Carl Icahn is worth $17.8 billion. John Paulson's $9.8 billion net worth is downright paltry by comparison.

What do these gentlemen have in common, other than being absurdly wealthy? 

They all made their fortunes investing other people's money. These men, and thousands others like them, got rich by running their own hedge funds. You can too. Maybe. Here's how.

One-hundred-dollar bills laying on top of each other.

Image source: Getty Images.

1. Are you ridiculously passionate about investing?

Do you eat, sleep, and breath finance? Is your Kindle currently displaying an SEC filing because you were reading it in bed last night? Is your idea of a "nice little Saturday" sitting at your desk researching court documents, warrant offerings, or industry publications?

It doesn't matter if you're an algorithm-driven trader or a value investing prodigy like Buffett, to successfully start your own hedge fund, you must be single-mindedly obsessed with making money in the markets.

The reason is simple enough. Successfully opening a hedge fund means convincing other people that you are a better steward of their money than they are. You must already have a proven strategy and a track record of making money investing.

Before an endowment or pension fund writes a check for $100 million in your name, they must know that you know what you're doing, you're committed to it, and that you bleed investing. 

As The Motley Fool's Knowledge Center describes it, hedge funds are "private investment funds that pool capital from investors and use specific strategies to generate a return on investment. The name is derived from the practice of hedging market risk by pairing complementary investments and thereby offsetting losses."

2. Do you have a network of high-net-worth individuals willing to invest in your fund?

This part is easier for some than others. If you already manage money at a bank or hedge fund, then you have a huge leg up on the rest of us. For everyone else, the hardest part of starting your hedge fund is raising money. Not only is this the money that you'll be investing, this is also the money that will pay your salary.

The typical hedge fund collects a 1%-2% management fee each year based on the total assets in the fund, plus a 20% cut of investment profits. This is the famed "2 and 20" structure you've probably heard on the news. 

If your start-up hedge fund raises $10 million -- which is a ton of money but still quite small by today's standards -- you could reasonably count on $100,000-$200,000 in management fees per year. That would be great money by nearly any standard. Any standard except being a hedge fund manager.

Throw in costs for compliance, administration, reporting, and marketing, and you're likely losing money. That means you will need to raise more money, a lot more. With standard expenses and regulations already on the books, plus new red tape being rolled out constantly, you'll likely need to raise $100 million or more to successfully launch your fund.

Without a track record and existing network, raising that much cash is extremely challenging, to say the absolute least.

3. Lawyers, brokers, accountants, and analysts

Starting your own hedge fund is starting your own small business. You'll have to deal with tax strategies, accountants, managing employees, and yes, even meeting payroll every month.

As a small start-up fund, you'll likely outsource a great amount of this work. A quick Google search turns up plenty of companies ready to help you on your journey to hedge fund mega wealth. That help is, unfortunately, really expensive. 

If your approach is quantitative -- meaning you rely on computer algorithms to uncover market inefficiencies -- then you will also have a very high IT bill every month to pay for all those servers, high-speed fiber optic connections, and data scientists.

Remember the "2 and 20" math from above? The 1%-2% management fee has to pay for all of these expenses. Your hedge fund is a business; the income and expenses have to make sense.

Regardless of your approach, you'll also spend a great deal of your time and energy on customer service. That's right, even after you've cashed in those investor checks, you will still have to manage and cultivate those relationships. That means investor letters every month or quarter. That means answering phone calls and discussing performance, strategy, investments, and soothing any concerns they may have.

It's going to be a lot of hard work before you can kick back on your super yacht with Ray Dalio

4. Oh yeah, you also have to invest

At this point, you'd be wise to take a breath, because the challenges are really only starting.

You've somehow raised money, convincing investors that your investment strategy is exactly what they need for their $100 million. You've navigated the extremely complex regulatory requirements (those requirements are outside the scope of this article). You've even hired an operations manager to handle administration and coordinate between your lawyers, accountants, and traders. 

Now it's time to put all that investor money to work. You'll apply your strategies and hope for the best. If everything goes according to plan, you'll be hob-nobbing among the nation's elite financiers in no time. If things don't go to plan, you could be broke before next quarter's end.

The hedge fund world is ridiculously competitive. Investors expect results; either you achieve those results, or someone else will. There are over 10,000 hedge funds today, up from just a few hundred 15 years ago. One false move, and those enthusiastic investors could turn into enthusiastic redemptions.

Sure, starting a hedge fund is a long shot. But if you have the passion, the knowledge, the network, and the small-business acumen, there's no reason you shouldn't get rich doing what you love.

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