02 // Fund Establishment

The key to a successful fundraise and eventual launch is adequate prior planning in the early stages and the effective management of all parties involved including the asset manager’s own team.

Fund Establishment
Key Considerations

1. Structure

The structure of the Fund needs careful consideration and you will need support and guidance from advisors and service providers. The legal form of the fund should be one familiar to your investors and, to be successful, should generally be tried and tested within the private capital space. Tax efficiency is clearly critical but other factors are important such as flexibility of the structure, transparency and regulatory impact.

2. Domicile

For a first time fund it is critical to spend time on domicile selection. It is important the jurisdiction offers you what you need from a tax and regulatory perspective but also offers flexibility, stability, speed to market and acceptable economics. The ability to efficiently market to investors across Europe is critical. Where you have a cornerstone investor we recommend ensuring they are onboard with your chosen domicile.

Gen II operate in key European Fund Domiciles including the UK, Ireland, Jersey and Luxembourg.

It’s important to ensure that your fee structure is a ‘market fit’ for the type of strategy you are pursuing, and consider offering special terms, e.g. reduced carry for first close or sizeable LP commitments.

// Conor Smyth, TritonLake

3. Fund terms and economic viability

Investors and their advisors balance favourable terms with the type of investment they are making. Fees that are too high, or terms that are too restrictive, are unlikely to be attractive to potential investors whilst funds that do not make enough money won't be viable.

Take into account the strategy, transaction cost, advisory costs, payment timings, carried interest structure and how it is split and which costs are to be incurred by the fund versus the manager.

There will be external fees to pay including regulatory charges and costs associated with external advisors, such as legal advice, placement agent fees and travel requirements. These costs may be on top of some usual business expenses, such as staff fees and office space.

It's always worth emerging managers checking whether their third party advisers can help with some of these expenditures. At Gen II we pride ourselves on transparency and flexibility of fee arrangements.

Third parties such as fund administrators can help you identify a suitable fund structure and ensure you remain compliant across all the jurisdictions in which you are promoting your fund.