A year ago I was struggling to solve a challenging problem. After years of dreaming, I was finally going to start my own investment fund. The problem, though, was choosing the kind of fund I wanted to run.

I wanted to build a firm that was independent of Wall Street, so I could manage my new portfolio as I knew it should be done. I also wanted to invest my own family’s wealth in the fund to grow it as much as possible over the years. That meant saving money on fees, taxes and commissions.

I wasn’t interested in trying to be all things to everyone. My strengths were in value investing, or selecting a handful of good undervalued companies and owning them long-term. I wanted my friends and clients to be able to invest the same way, too, right alongside me.

I decided I needed a way to consolidate all of my family’s brokerage and retirement accounts under one roof, and then manage them all as if they were a single portfolio. Each account owned the same stocks, after all. If I could group all those accounts together and invest them the same way, I’d save money on fees and reduce the time spent managing each individual account.

Then I could easily bring friends and other investors onboard, too, since they would also benefit from lower fees and the additional time I could put into research when easily managing all accounts as a single portfolio.

Unfortunately, there was no obvious way to build the kind of fund I needed. I talked to brokerages, fund managers, financial planners, analysts and lawyers. Most would say the same thing – that I should start a mutual fund or hedge fund. But I considered those lousy options.

The mutual fund model as we know it today originated in the 1920’s. That model is broken.

The vast majority of mutual funds chronically underperform, charge fees that are too high, own too many stocks and trade too much. Mutual funds force taxes onto their investors, make their fund managers inaccessible and spend investors’ money as if it were their own. The majority of mutual fund managers do not own a single share in the funds that they manage.

Not that those managers are entirely to blame. Mutual funds are a very highly regulated product. Those rules directly impact the performance of the majority of mutual funds, dictating everything from how many shares of a company can be owned to the number of companies the fund can invest in. While investors need to be protected, the mutual fund industry has abandoned its fiduciary duty.

I’m also way too cheap to spend $400K a year in operating expenses just to get a mutual fund off the ground.

Hedge funds have a better model, although it still has flaws.

Most investors in hedge funds pay exorbitant fees. They also have zero daily transparency into where their money is invested, and why. As recent headlines have illustrated, these funds also have effectively no oversight.

While there are few barriers to starting a hedge fund, running one of these funds still has its difficulties. Hedge funds cannot advertise, for instance, yet they can only service a certain group of investors. As a result, managers spend considerable energy trying to find new investors.

I just wanted to buy amazing businesses. Plus, I live on a small island down the road from this guy, and you can’t out hedge-fund the king of the hedge funds.

Investing money in a retirement account like an IRA in a hedge fund can also be a hassle, often tying a portfolio manager to a Wall Street brokerage.

While the hedge fund model is not quite broken, it was a far cry from what I needed.

So, I decided to piece together what I eventually came to call a Spoke Fund®.

Three months after launching our flagship portfolio, the Tarpon Folio had attracted almost 40 new investors – without any marketing and during the worst economy in decades.

It was a model that worked. And I think it could work for other money managers, too. So please consider this an invite to stick around as I tell whoever might be interested how to build a spoke fund.

Portfolio managers: go to www.SpokeFund.com for more about how to build a spoke fund.