Vanity Fair just published an educative article with the 7 steps to set up a hedge fund.  Very entertaining reading.  Missing one step.

Step 2.5. Get simple technology infrastructure. Including a good analytics/CRM package (Pertrac for example) and an market leading reporting and document sharing platform to manage all the flow of documents to and from potential investors.

Virtual data rooms (VDRs) have become the norm in the due diligence stage in most M&A transactions, substituting the traditional paper-based data rooms (see Know-how article “Virtual data rooms: the due diligence evolution”). However, in the last two years, the use of VDRs has expanded dramatically: both deeper in the M&A process and beyond M&A transactions. We believe that this shift in the role of Virtual Data Rooms is driven by the positive experiences that advisers and clients have had with the convenience, simplicity and functionality of VDRs and with their satisfaction and trust in the level of service provided by dataroom specialists.

During the next few weeks, we will talk about the the use of VDRs in different areas of the corporate world.  Among others, we will focus on:

• Private Equity/Venture Capital Funds

• Hedge funds

• IPO Transactions

• Restructuring (Bankruptcy)

• Health

• Corporate Repository

We will share our experiences in each area with specific examples.  Please send us comments and thoughts!

The Hedge Fund Transparency Act of 2009 has changed how funds report to their investors significantly increasing the risk of confidential data leaks.  There have been a number of well publicized events in which hedge fund position data was posted on public forums!

Asian Investor has a very interesting article about the use of Virtual Data Room technology to minimize this risk. Enjoy!

In general, you should consider engaging a virtual dataroom (VDR) provider to share and control documents with an outside party while maintaining confidentiality and being able to track access to a given document. In particular some of the areas you should focus on are:

• Preparing documents for a transaction, especially when documents need to be put together from different sources and shared with different parties.


• Circulating information memoranda or teasers. A good virtual data room will make the process easier and will provide valuable tracking and audit information.


• Turning around drafts of legal agreements. A good dataroom offers a very simple, secure and easy-to-use document versioning system without the expense of complex dedicated document sharing platforms.


• Conducting due diligence, as a substitute for a paper or email-based data room.


• Closing a transaction, as a substitute for hard copy deal bibles. Very useful when reps and warranties are a key component of the transaction.