Launching an Investment Fund: Step by Step
Launching an Investment Fund can be a highly rewarding venture, offering fund managers the ability to pool capital from multiple investors and deploy it strategically across various assets.
Regardless of the type of fund you are planning to launch, the process requires careful planning, regulatory compliance, and an efficient operational setup. In this guide, we will explore the key steps involved in launching an investment fund, from developing an investment strategy to managing regulatory obligations and setting up back-office systems.
Step 1: Define Your Investment Strategy
A Managed Investment Fund (MIS) is a type of pooled investment vehicle where investors' money is combined and managed by professional fund managers. Each investor in the fund purchases units, with returns dependent on the performance of the overall fund relative to the investor’s ownership of those units. The unit trust structure ensures that the value of each unit fluctuates based on the fund’s performance.
Before launching your fund, it’s crucial to clearly define your investment strategy. This strategy will guide the types of assets your fund will target and help set the right structure. Common fund strategies include:
• Venture Capital Funds investing in high-growth startups.
• Private Equity Funds acquiring mature businesses to improve operations.
• Property Funds focusing on property acquisition, development, or management.
• Private Credit Funds providing debt financing to businesses or individuals.
• Alternative Asset Funds targeting niche markets.
Another important consideration is the type of investors you want to target: are you aiming for wholesale/sophisticated investors or retail investors?
Your strategy will determine the type of investors you attract and the structure of your fund.
Step 2: Choose the Right Fund Structure and Select the Right Partner
Selecting the right structure is one of the most important decisions you will make. The structure you choose impacts how your fund operates, the types of assets you can invest in, and your regulatory requirements. Some common structures include:
• Unit Trusts: Allowing investors to purchase units representing their share of the fund.
• Limited Partnerships (LPs): Ideal for venture capital, providing flexibility and favourable tax treatment. However, they may require higher setup and operational costs.
• Special Purpose Vehicles (SPVs): Used for a variety of purposes including one-off investments or specific projects.
As part of the structuring process, fund managers will need to decide which functions will be outsourced. Selecting the right service providers is critical for successful operations. Decisions about who will serve as Trustee/General Partner (GP)—internally or outsourced—as well as choosing an Investment Manager, Fund Administrator, and Registry Provider will shape the fund’s efficiency.
Your choice of structure should align with your investment strategy and meet both investor and regulatory requirements.
Step 3: Regulatory Compliance and Licensing
In Australia, investment funds are regulated by the Australian Securities and Investments Commission (ASIC), and in most cases, the fund manager must hold an Australian Financial Services License (AFSL) or be covered under someone else’s AFSL. There are certain exemptions that can be used and relied upon for not holding an AFSL, and we will explore these in future articles.
Fund managers are also subject to compliance requirements and must ensure that specific legal documents are prepared, such as the Information Memorandum (IM) or Product Disclosure Statement (PDS), in addition to adhering to AML/KYC regulations. Implementing robust risk management processes is also essential to safeguard investors.
Ensuring that your fund is fully compliant from day one is crucial to avoid legal or financial penalties.
Step 4: Develop a Fundraising and Marketing Strategy
Once the fund is structured and compliant, the next step is raising capital. This can be one of the most challenging stages of launching an investment fund, as it involves marketing your fund to potential investors and convincing them to commit capital.
Key considerations include:
• Target Investors: Are you aiming for institutional investors, family offices, high-net-worth individuals, or individual sophisticated investors?
• Pitching the Fund: Develop a strong value proposition that outlines your investment strategy, potential returns, and risk management practices.
• Building Relationships: Networking with potential investors and building a credible reputation in the investment community are crucial.
A well-executed fundraising strategy will help you attract the capital needed to launch and grow your fund.
Step 5: Operational Setup and Back-Office Support
Efficient operations are essential for managing your fund effectively. This includes setting up back-office systems for:
• Selecting service providers: Trustee/GP, Investment Manager, Fund Administrator, and Registry, Tax etc.
• Investor Relations: Onboarding investors, managing AML/KYC processes, and communications.
• Fund Administration and Registry: Handling investor accounts, transactions, and reporting.
• Fund Accounting and Reporting: Ensuring accurate accounting, managing distributions, and providing regular performance reports to investors.
• Compliance Monitoring: Regularly reviewing and ensuring ongoing compliance with regulatory requirements.
• Technology Platform: Utilising technology to streamline operations and ensure seamless fund management.
Setting up strong back-office support ensures your fund's efficiency and reduces administrative burden.
Step 6: Ongoing Management and Scaling
Once your investment fund is launched, ongoing management is key to ensuring long-term success. This includes:
• Monitoring the performance of the fund’s investments.
• Communicating regularly with investors through detailed reports and updates.
As your fund grows, you may also look for opportunities to scale by raising additional rounds of capital or launching new funds under the same umbrella.
How FundBase Group Can Help with Launching Your Investment Fund
At FundBase Group, we specialise in providing comprehensive support for fund managers looking to launch, scale and operate their investment funds. Our services include:
• Fund Structuring and Setup: We guide you through selecting the right structure for your fund and ensure full regulatory compliance.
• Licensing and Regulatory Compliance: We help you obtain the necessary licenses and comply with all relevant regulations.
• Back-Office and Operational Support: From investor onboarding to fund administration and reporting, we provide the operational infrastructure needed to manage your fund effectively.
• Technology Platform: Our platform supports fund managers to ensure seamless fund operations.
Conclusion:
Launching an investment fund is a complex but rewarding process that requires careful planning, regulatory compliance, and effective operational management. By defining a clear investment strategy, choosing the right structure, and building a solid operational foundation, fund managers can position their fund for long-term success.
At FundBase Group, we offer the expertise and support to help you launch and manage your investment fund, ensuring it runs smoothly from the outset. Contact us today to learn more about how we can assist with your fund's launch and growth