Quick guide to starting a new fund

Quick guide to starting a new fund

It is all about making your fund attractive to investors.

By using a top tier administrator and a top tier auditor you are demonstrating to investors that your fund is a safe place to invest and that you are backed by a reliable team.

It is not only investors that take an interest in a funds’ administrator, new firms need an auditor to verify their track record and these auditors can take issue if there are no independent third party numbers to review. The audit can also become costly without an administrator as a lack of external data verification can make an audit more difficult to conduct. Working with a top tier fund administrator, such as Apex, that is dedicated to the alternatives industry can also help managers to secure better rates for fund audit – the more credible your administrator, the more reputable your fund becomes. Apex’s global reach and local presence means funds receive local support alongside extensive global backing, this in turn helps position your fund as having robust procedures and processes in place and a safe place for allocators to invest.

How much capital will I need?

Generally the minimum a new fund requires is above $2 million (USD) seed capital to start up successfully. However, raising assets above this amount gives start up managers a better chance of succeeding as the performance of the fund will be less affected by the fixed costs.

HOW DO I DECIDE WHERE TO DOMICLE THE FUND?

There are 4 main factors influencing the domicile location of a new fund:

1. Where do your investors want their money to reside?

Globally there are a diverse range of rules about offshore investments across different jurisdictions; the domicile favoured by your investors should be a key deciding factor when it comes to settling on a fund domicile.

2. Where are you going to live?

Your choice of residency will determine the regulations under which your fund will trade and in turn govern how you are able to conduct business. Countries with minimal regulations are often chosen as fund domiciles due to the fact they have fewer regulatory hurdles which results in legal setup costs being comparatively lower. The regulatory requirements for a fund tend to be dictated by the country in which decisions are taken; therefore if you live and work in London (UK) for example, the fund would be regulated by the Financial Conduct Authority (FCA).

3. How does your fund become authorised?

For start-up funds there are various regulatory solutions available, as a fund administrator Apex can help you find the most appropriate; new managers can become authorised under the umbrella of a specialist firm or another fund for a relatively small fee.

4. How are you going to administer your fund?

Almost all new funds outsource administrative responsibility to a specialist to ensure the fund is run  efficiently whilst allowing its key employees to focus on raising assets and fund performance. Third party Administrators are generally responsible for the management of virtually all aspects of the day-to-day operations of the Fund, with the exception of actual investments.

Why do I need an administrator?

Apex will do the due diligence on investors to protect your fund and ensure you trade as you promised to trade in your fund description reconciling those trades on your behalf. We will also produce the net asset value (NAV) of the fund as often as required so that investors know what is happening to their investments along with assisting with audits and verifying your track record.