Launch a Fund

Launching a fund can be like buying real estate: The process is relatively straightforward, but there are a number of potential pitfalls that could cost you time and money, and possibly scuttle the deal. To make the most of your fund launch, you’ll need to make decisions such as:

Should you use an umbrella series trust or establish your own trust?

The umbrella series trust is turnkey: You use an existing trust (or registrant), with an established board. Going this route streamlines the launch process, getting the fund to market relatively quickly and inexpensively. It also relieves you of the responsibility of administering the board, freeing your firm to focus on managing the fund and raising assets.

Some advisers may not be comfortable with aspects of the series trust model, however—in particular, using a shared board. A fund’s board has control over the investment advisory agreement, so an adviser may prefer to hand-select its members. In practice, fund boards tend to be accommodating, within the limits allowed by their fiduciary duties. Still, you need to consider whether you are comfortable with the board provided by the fund services company.

The alternative, setting up a registrant, grants you more control, but it also involves greater cost and time—typically an additional 30 to 60 days before the fund reaches the market.

How broad should your registration statement be?

One of the first and most important steps in launching a fund is to write the registration statement. This document can lay the groundwork for future growth or impose unneeded restrictions, depending on the foresight brought to bear when writing it.

For example, say you are launching a mutual fund for institutional clients; the simplest and least expensive approach, at least in the immediate term, would be simply to register a single, institutional share class. Registering only an institutional class could prove limiting in the future, however—for example, if you wanted to make the fund available to individual investors. In that case you would need to obtain approval from the Trust’s board, amend the registration statement and refile it with the SEC. Setting up the a second share class with a 12b-1 fee may take a bit more time and expense at the outset, but could prevent cost and headaches in the future.

An experienced partner can help you think through your business strategy, and make sure the fund’s registration statement supports it.

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