What is an incubator fund?
An incubator fund is an ideal investment vehicle for business managers looking for a stepping stone to start a complete hedge fund. Typically, a manager will spend 6, 6 to 12 months investing in the fund and managing the fund's assets to test investment strategies and create a track record. Once a successful track record is established, the manager can then reach out to potential investors and receive indications of interest before spending the entire fund.
How is the Incubator Fund structured?
An incubator fundis usually formed by the formation of two separate entities: (1) a limited partnership (LP) or a limited liability company (LLC) that will act as the fund. And (2) a limited liability company (LLC) that will act as the investment manager / general partner of the fund (or a management member if the fund is an LLC). The individual who is actually managing the capital will usually serve as a managing member of the investment manager. This framework not only limits personal liability to you and your investors but also supports beneficial tax treatment. Once you are ready, this structure enables you to easily transfer the incubator fund to the entire fund.
How long do I need to run an incubator fund before investors market the fund?
You can send performance data to investors at any time during the incubation. It is our experience that managers typically configure these funds for a period of 3 to 12 months before converting them into full hedge funds. The longer the track record, the more attractive the investment will be to potential hedge fund investors.
Can I start collecting interest indicators from potential investors during the incubation phase? If so, what kind of information should I send?
Yes. Although you cannot market interest in the fund during the incubation period nor accept capital from outside investors, you can start collecting interest indicators through your personal network, friends, and family (ie People you already have a relationship with). Marketing of funds through public advertising or general solicitation is prohibited. Also, depending on the state of your residence, it is generally forbidden to keep yourself out as an investment advisor.
How much does it cost to set up an incubator fund?
A key catalyst for the growing popularity of the incubator fund is its cost-effectiveness. Typically, an incubator hedge fund can be created in addition to the $ 2,500- 500 3,500 funds and management company state filing fee. incubator fund set up
If you are ready to begin the process of launching an incubator fund, or if you would like additional information on the timeline or costs for launching your fund, consult an assistant today. hedge fund incubator