This article is the first in a series that provides aspiring fund managers with high-level guidance about some of the key steps and issues that need to be tackled to launch a private fund with institutional capital. Our focus is on emerging managers who are either (1) spinning out from an existing manager or (2) independent sponsors or traders who want to raise their first private fund.
Background
While a strong investment track record is of paramount importance to successfully launch a fund, there are many other qualitative factors (i.e., legal, operations, accounting, regulatory and tax) that must be carefully considered by a fund manager. We dont set out here to give all the answers because there is no one size fits all for launching a fund. That said, we view fund launches involving institutional investors as being comprised of three distinct phases, some of which may overlap with one another at any given time
Phase 1: Pre-Launch
Phase 2: Launch
Phase 3:Investor Management and Closings Pre-Launch
the focus of this article, requires significant time (generally 3-4 months). The decisions made during this phase will have a major impact on the speed, efficiency and success of the fund launch and its overall cost. Many of these items can be handled simultaneously, subject to the availability of manager personnel and outside service providers. Moreover, the fund managers financial resources and its relationships with, and flexibility of, its service providers will also play a significant role in determining how much can be accomplished during this phase and how long it takes. In our view, the most efficient way to present this commentary is in the Q&A format below.
Please click here for the full Q&A
Launching a first-time fund with institutional capital is a serious undertaking and is not easy for any aspiring fund manager to accomplish – especially where there are limited personnel and financial resources, as well as a tight timeframe. But, with the right team and planning, an organized process can be put in place to guide a manager through Pre-Launch, which will help to lay the groundwork for a successful fund raise. The remaining articles in this series will focus on the steps that underpin the other two launch phases, Fund Launch and Investor Management/Closings.
