The establishment of a fund is a matter that will require patience, dogged determination, professional capability, a sound investment idea, a planned route to market and seed capital.
If in possession of these things your next decisions will be where to establish the fund and whether it would benefit from being regulated. To help with these important decisions you will need to engage with a professional advisor that has the necessary experience to look at the proposed funds characteristics and assess the marketplace for the best jurisdiction with the right regulatory regime for the fund.
The full particulars of the fund need to be set out in an Offering Memorandum and the type of investment or asset and the route to market will form its basis. The content of the Offering Memorandum will require serious consideration and will need to comply with the chosen regulatory regime. A minimum investment amount will need to be set and details on how often net asset values (NAVs) are calculated along with how subscriptions and redemptions are made will all need to be described. The intended asset types and portfolio are important, for instance where assets are fairly illiquid such as in the case of property development funds, NAVs and redemptions will usually be calculated less frequently than those of a fund investing in short-term and liquid financial products.
The route to market is another major key factor, is the fund being sold directly to the public or to institutional investors, or to a qualifying level in between? Generally a fund is more heavily regulated and more protections are required for investors if it is intended to be sold to the public. The more a fund is regulated the higher its running costs will be.
What are the risks for the investors? How sound or secure is the investment? What are the expected rates of return on investment? These are further details that will need to be included in the Offering Memorandum and your professional advisors will assist in bringing all of this together and help with developing the fund structure to the point of launch.
Once launched, dogged termination and patience will be needed to ensure that there is a steady flow of investors and to ensure that the investment is running as expected.
An Investment Manager may be appointed to look after and advise on the composition of the investment portfolio and an experienced Fund Administrator will ensure that any statutory and regulatory matters are complied with, investors are dealt with in a timely and appropriate manner, and that transactions are taken care of.
Factors that affect the particular investment market of the fund will impact on performance, known potential factors such as elections, budgets and proposed changes in regulations can be considered. However, there will always be unknown factors that will affect the investment such as fluctuating markets, exchange rate changes and unexpected election results which appear to be more commonplace recently (Brexit/Trump).
Funds are vital for raising capital for projects, life assurance policies, institutional investment, diversification of investments, spreading risk and much more. Those in a position to bring new funds to the marketplace are welcome to contact Abacus for guidance on how to proceed. We are a licensed fund administrator with a depth of knowledge and experience in bringing funds to this marketplace.
Written by Stephen Colderwood, Business Development Manager