Fund Formation & Structuring

How to Launch a Fund Within a Short Period of Time

Historically, launching any Alternative Investment fund – hedge fund, venture capital, real estate fund or private equity fund – has been a very expensive and overwhelming task requiring several months to complete. Additionally, the operational costs for start-up, infrastructure and operational ran well into the six-figures range.

Luckily, the Alternative Investments industry has significantly evolved and when partnering with the right service provider before launching a fund, managers can now launch a fund in seven to eight weeks.

Types of Funds

There are two main types of Funds based primarily on the tax considerations and implications for prospective investors:

  1. Domestic (US) Funds for US investors
  2. Offshore Funds for non-US Investors (international) and US tax-exempt entities

Fund Structures

Alternative investment managers can launch a fund using fund structures such as a master-feeder structure or a side-by-side structure, along with side pockets and different share classes depending on the type and residence of the prospective investors.

Service Providers

Before launching a fund, Alternative Investment managers usually engage with the following service providers:

1. Legal Counsel
Having legal counselling is of paramount importance to ensure long-term viability and marketability of the fund. This includes proper fund structure, accurately drafted documents and compliance with all regulatory requirements. Therefore, only firms specialized in investments management should be chosen.

2. Prime Broker
The fund manager should establish a prime brokerage account. These firms offer typical brokerage services, including custody of assets, trade execution, trade clearing/settling, portfolio financing and management, risk management and reporting.

3. Fund Administrator
Fund administrators provide monthly and annual accounting services to hedge funds. Their services generally include portfolio accounting and reporting, transactions recording, subscription and redemption accounting services, performance fee and soft dollar accounting, invoicing and bookkeeping.

4. Auditor
Unless the manager is a registered investment advisor, having a yearly fund audit prepared for private equity and venture capital funds is not required by law. However, investors generally consider auditing services to be essential to due diligence.

Fund Startup & Operational Costs

Legal fees usually fall between $20,000 and $100,000 for domestic and off-shore fund formation depending on the complexity of the fund structure and investment strategy. Annual audit and tax fees range from $20,000 for small, emerging funds to more than $100,000 for large, complex funds. Annual fund administration fees average $18,000 for emerging hedge funds and more than $60,000 for large, complex funds.

Four Tips for Startup Funds

In the investments world, reputation and expenses are everything while launching a fund. Akram & Associates recommends following these four tips for startup funds.

Experienced Professionals

Akram & Associates provides emerging and established hedge fund managers with in-depth knowledge on all aspects of fund formation and ongoing operations. Our team of specialized professionals guide each client through the end-to-end process for setting up their hedge fund. We provide close personalized attention to all aspects of the alternative investments options that best suit each individual need.

Our services include:

  • Pre-launch advice on fund structuring and establishment
  • Liaison with the Attorneys during the preparation of Limited Partnership Agreement (LPA), Private Placement Memorandum (PPM), subscription, and redemption documents by our recommended law firms
  • Education of clients by sharing 20 years of knowledge on best practices
  • Liaison with prime brokers to set up account access and perform a subsequent test to ensure accordance between brokerage reports and fund’s governing documents

In addition, we can assist in assembling a team of service providers. We will be happy to connect you with our network of experienced attorneys, prime brokers and compliance professionals with decades of experience structuring domestic and offshore hedge funds in a wide variety of asset classes and investment strategies.

Contact Us Today

Call us toll-free at 844-386-3829, or use the form on this page to schedule a complimentary consultation with one of our professionals to discuss the legal structure, timeline and costs involved in setting up a fund.

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