Launching your own alternative investment fund is a formidable undertaking, which can tie up a lot of your capital and time. ScalingFunds offers turn-key SPV and fund management services that allow investment managers to launch new structures without the hassle and paperwork. Keep resources focused on what you do best – raising capital and managing investments.
During your pre-marketing period you have several decisions to make. The first step is to formulate your marketing strategy, which includes what kind of investor(s) to target and how you can tailor the offering to attract them. Many startup fund managers make the mistake of adopting a “spray and pray” strategy, which can be physically and emotionally draining due to their attempt to meet a high volume of prospects. An equally important step is to determine what kinds of assets you will target. These questions help to decide if your offering is public or private, regulated or unregulated, retail or professional, open-ended or closed-ended. There are positives and negatives to each one of these decisions.
A public offering allows you to market your fund to all types of investors, including professional and retail clients. Many investors require the high transparency that public, regulated, offerings provide. However, the drawbacks of a public offering include a longer time to market, higher expenditures for compliance, investor relations, and legals. Your offering will also have to be approved by the corresponding financial services regulator, multiple ones if a public offering of an Alternative Investment Fund (AIF) is planned in the EEA. Alternatively, private, unregulated offerings provide a selection of several private fund vehicles that balance the compliance and flexibility issues associated with public offerings. For this reason, private offerings are widely utilised by alternative investment managers raising capital from institutional investors.
When examining open-ended and closed-ended vehicles, it is important to consider that not every investor requires liquidity and that some investors prefer the alignment between investment manager and investors that the closed-ended
structure provides. Running an open-ended fund offers investors greater liquidity at the cost of holding more cash at hand, and compels investment managers to consider the prospect of having to sell illiquid investments if redemption requests outmatch new investors. This typically occurs during periods of intense volatility, intensifying the fall in value of the fund’s assets and can lead to liquidating the entire fund.
Once you’ve formalised your marketing strategy, there are structuring details to confirm that relate to tax optimisation, compliance, regulation, and governance. Should your Venture Capital fund be structured as a limited partnership with a GP and Carry Vehicle? Which domicile is suitable for the structure? What avenues exist for your fund marketing/distribution strategy?
Based on the investment strategy, targeted investors, and marketing strategy of the proposed fund, it is crucial to select an appropriate fund regime, the legal form of the fund vehicle (e.g., limited partnership or corporate form), and the jurisdiction that the fund vehicle will be domiciled in. Further, the selected structure must meet fund manager, third-party service providers, as well as fund governance, tax, accounting, and other regulatory requirements. ScalingFunds Fund Management Services assist in the implementation of the selected fund and management structure, with the objective to comply with the AIFMD and achieve operational and tax efficiency.
ScalingFunds Fund Management Services offer the option to open a regulated fund that would be part of the ScalingFunds Lux Umbrella Fund, offering the best of both worlds: a private, regulated offering with a quick setup in the world’s most trusted on-shore jurisdiction for funds. Alternatively, many alternative investment managers prefer less oversight reporting and opt to launch an AIFM supervised Luxembourg special limited partnership (SCSp) under the RAIF regime. Luxembourg’s SCSp is comparable to the Anglo American Limited Partnership, the preferred vehicle for Private Equity, Venture Capital, Real Estate, Private Credit, and other Alternative Investments.This allows PE, RE, and VC managers to market their fund in the EEA with a lighter supervisory regime and a quick time to market while retaining control, but can limit the investor pool.
Once you’ve formalised your marketing strategy and have decided on the appropriate structure, your focus will be on how to best execute your plan. There are many things to consider when launching an alternative investment fund. You want your fund formation documents to be well thought out as your fund will solely be governed by the articles and provisions in the fund formation documents, i.e, the Offering Memorandum and LPA. Soliciting the services of an experienced firm with intimate knowledge of the law will provide you with solid ground for negotiations with investors and ultimately a successful launch. Being advised on the appropriate structure is important to minimize tax leakage and make use of double taxation treaties, while ensuring a sound and secure investment for your investors. Careful planning with the help of a reputable firm will set you up for success.
Here is an exhaustive list of factors to consider:
Typically investment managers need to assume several roles when setting up and launching an alternative investment fund. Finding the right service providers, lawyers, auditors, independent directors, banks, and fund management software is time consuming and redirects your focus from your investors. Liaising with all of these parties forces you to become a project manager for your own fund setup. ScalingFunds Fund Management Services eliminate the hassle of setting up an alternative investment fund.
ScalingFunds Fund Management Services offers an all-in-one digital portal and sole point of contact that engages all service providers, lawyers, auditors, independent directors, tax advisors, and more to set up and launch your alternative investment fund or SPV. We work with industry leading firms to come up with a solution unique to your needs. You save time and ultimately money going to market quicker, with less overhead, and without having to grow your team.
We have experience launching regulated and unregulated structures (funds, SPVs, Securitisation Vehicles) in top onshore European jurisdictions, including Luxembourg, Ireland, the UK, Germany, and in select offshore jurisdictions. Our team of in-house experts can assist you with all your commercial needs and provide you with personalised advice to support the growth of your business. The example below highlights how we were able to help Peakside make the best decision for their growth.
Peakside Capital Advisors AG (Peakside), a European real estate investment manager, and ScalingFunds teamed up to launch Peakside Income Fund I, a real estate fund structured as a SCSp RAIF. The cooperation had the strategic goal to utilise technology as a toolbox to simplify and set up the future of real estate investment. ScalingFunds allows the fund to be completely digital with all subscription and investment documents being signed electronically and stored in a secure data room.
ScalingFunds supports asset managers and alternative investment managers through the choice of fund/SPV vehicles, the analysis of target markets, the definition of an efficient operating and tax model and distribution strategy, and the selection of service providers. With our global expertise and scalable technology, we help you and investors maintain their investment focus while we support your investment operations. Find out how we can help you structure and launch your next fund or SPV.
This material has been prepared for general informational purposes only and is not intended to be relied upon as financial, tax, legal, or other professional advice. Please get in contact for specific advice.