Launching an Investment Fund: Considerations

A growing number of investors are looking for alternatives to standard funds with large scale banks and brokerages, and private equity / private fund firms have long been recognized as a successful asset class. As more investors seek out the returns offered by private investment, the demand for successful and knowledgeable fund managers will only increase. Are you considering launching an investment fund of your own? If so, your goals may be more attainable than you realize. Keep a few considerations in mind.

Research and groundwork

Launching a fund is similar in many ways to launching a small business. Before you can attract the attention and earn the trust of potential investors, you’ll need to toil behind the scenes, putting in the hours of research necessary to differentiate yourself from your competition. In which market sector will you specialize? If you plan to focus on biotech, energy, or healthcare, you’ll need to work these fund goals into a cohesive business strategy. And in order to do this, you’ll need to understand the quirks and prevailing trends of your own marketplace inside and out. Research should be grounded and guided, so before you dive in, create a map for yourself by finding mentors, points of exposure, and focused questions you’ll need to answer.

How will you approach and/or attract target companies?

Some private fund managers want to place their hands on every detail of the companies they target, including strategy and operations. Others just want to clear up debts and build revenue. How will you focus your attention? Since you’ll be targeting companies that are not publicly traded, you may find plenty of ways to help these companies raise capital, but you may also want to focus on helping them build out a better business plan to make them more attractive to a potential acquirer. You’ll also want to make sure you have absolute confidence in the Board of Directors running the company.

You’ll need a strong set of advisors.

No one does everything alone, so in addition to attorneys and accountants, you’ll need to look for and engage industry experts and independent consultants who can help you choose a path forward. Your team should be able to structure defenses and know how to manage information, including in the event of a security breach. Manage risks before they happen.

Details and overhead

In the meantime, just as you would with a small business, you’ll need to rent and furnish an office, hire in-house staff (if you decide to do so), and set up all the nuts and bolts of employment structures, including compensation, payroll, taxes, and insurance benefits.

Don’t let the tasks in front of you hold you back! Every risk is manageable, and every obstacle is surmountable if you have the right people in your corner. Get the answers you need in order to move forward with confidence.