Case | HBS Case Collection | March 2014

Loki Capital Management

by Joseph B. Fuller, Shikhar Ghosh and Matthew Preble

Abstract

In December 2013, Michael Kane was preparing to launch his start-up's first hedge fund. While pleased with the development of the business, he wanted to address a few lingering issues before going any further. He debated whether or not to fire the company's chief operating officer (COO), Peter Jansen, who was becoming increasingly difficult to work with. While Jansen brought valuable skills and experience to the company, Kane wondered if the two could continue working together. If Jansen was fired, how should he be compensated for the work he had already done? Was he entitled to a share of the company's equity? Kane also had to decide how to raise the necessary working capital for his company. He had an offer from one hedge fund seeding firm which would both take care of his working capital needs and provide money for the fund, but he wondered whether the company's terms—including taking half of the fund's porfits—were too onerous. Alternatively he could raise the working capital from family, friends and an interested invesor, but he would have to court a large number of limited partners in order to build the fund's assets. Lastly, Kane debated how to split his company's equity between the members of the founding team.

Keywords: hedge fund; hedge funds; equity split; fundraising; investor clientele; Team building; human resource management; Human Capital; Human Resources; Equity; Financial Services Industry; United States;

Citation:

Fuller, Joseph B., Shikhar Ghosh, and Matthew Preble. "Loki Capital Management." Harvard Business School Case 814-049, March 2014.