FlexFunds Academy

How to create a private equity fund?

Authored by FlexFunds
fondo capital privado
fondo capital privado

Creating a private equity fund is a very complex process

Creating a private equity fund can be a way to diversify investments and take advantage of market opportunities. However, it is also a complex process that requires careful planning and a thorough understanding of financial markets.

What is a private equity fund?

A private equity fund is an entity that allows investors with high purchasing power, both individuals and legal entities, to invest in companies that are not publicly listed on the stock market.

These funds raise capital to place in companies that need financing to expand, improve their finances or carry out other projects.

Investing in a private equity fund involves rigorous analysis of the company’s fundamentals and a long-term partnership to earn long-term benefits.

According to the Corporate Finance Institute (CFI), institutional and accredited investors are often the primary sources of private equity funds, as they can provide large amounts of money for extended periods.

How to create a private equity fund?

If you are interested in creating a private equity fund, you should consider at least the following five essential steps:

1. Develop a business plan

First, you must have a business plan, which will be the cornerstone of a successful private equity fund. The model includes detailed data on the type of companies you will invest in and the investment strategy to be executed.

In addition, it must include information about the company’s objectives, how they will be carried out, and the possible risks with their respective procedures to mitigate them as much as possible.

2. Working out legal details

As a complex financial structure, it must comply with all legal requirements before creating a private equity fund, including a legally recognized company registered in the appropriate jurisdiction.

You must comply with all local and national regulations to operate legally. At this point, working with a finance lawyer to verify everything is in order is advisable.

3. Structuring Fees

Private equity funds charge fees to their investors, as they would otherwise be unprofitable. The structure of these rates will define whether or not the fund can be maintained in the long term.

Typically, two types of fees are charged: annual management and success fees. While the first covers the fund’s operating costs, the second is charged based on profits.

4. Assembling a competent team

The success of a private equity fund depends mainly on the team that manages it, just like any other company. For this reason, it is vital to have competent professionals with experience in finance and investment management.

Likewise, the team must have skills in the evaluation and analysis of companies in which it is going to invest, as well as be highly trained and motivated to maximize the profitability of the investment vehicle.

5. Finding clients

Once the private equity fund has been created, looking for investors interested in placing their money in it is essential. Today this can be done through different channels, such as personal networking, online advertising, and strategic partnerships.

A key pillar to attracting potential investors and satisfying existing ones is solid marketing. Otherwise, more than the client base may be needed to make the fund profitable.

How to reach more customers with ETPs

One way to reach more potential clients is through securitization of the private equity fund, a process carried out by FlexFunds that will convert it into an exchange-listed product (ETP).

With ETPs, investors can access their strategy via Euroclear and through their existing brokerage accounts.

If you want to know more about our ETPs, do not hesitate to request a meeting with the FlexFunds team so that we can answer all your questions.

Sources:

  • https://corporatefinanceinstitute.com/resources/wealth-management/private-equity-funds/

Related Topics

Talk to an expert

FlexDual Portfolio Details

Dual Custody: Securitizes a strategy with listed assets in a Bank of New York Mellon & Interactive Brokers accounts

Applications

  • Bankability: Global distribution of a strategy
  • Centralized managed account
  • Fund creation alternative
  • Custody of locally listed bonds
  • Design a mixed investment strategy of fixed income, equities, and derivatives

Advantages

  • Trading and custody platform with available leverage
  • Efficient subscription through Euroclear
  • Actively managed by a Portfolio Manager
  • No limitations on rebalancing or portfolio composition
  • Cost efficient
  • Flexibility in the choice of executing broker for underlying trades

FlexRegulated Portfolio Details

Securitizes a strategy with listed assets in an Interactive Brokers account targeting institutional and retail investors

Applications

  • Global distribution of a strategy
  • Centralized managed account
  • Regulated fund creation alternative

Advantages

  • Trading and custody platform with available leverage
  • European UCITs compliant
  • Market to institutional and retail investors
  • Actively managed by a Portfolio Manager
  • Market maker as part of the solution
  • Low value tickets
  • Cost efficient

FlexOpen Portfolio Details

Securitizes a strategy with listed assets in any custodian account

Applications

  • Global distribution of a strategy
  • Centralized managed account
  • Regulated fund creation alternative

Advantages

  • Manage portfolios from any major custodian
  • Introducing Broker Dealers maximize revenue from own trading fees structure
  • AUM remain on the introducer broker agreement
  • Efficient subscription through Euroclear
  • Actively managed by the Portfolio Manager
  • No limitations on rebalancing or portfolio composition
  • Cost efficient

FlexPortfolio Details

Securitizes a strategy with listed assets in a Bank of New York Mellon or Interactive Broker custodian account

Applications

  • Global distribution of a strategy
  • Centralized managed account
  • Fund creation alternative
  • Custody of locally listed bonds

Advantages

  • Efficient subscription through Euroclear
  • Actively managed by a Portfolio Manager
  • No limitations on rebalancing or portfolio composition
  • Cost efficient
  • Flexibility in the choice of executing broker for underlying trades
Logo All RGB FF Logo FF Pos H

Welcome to FlexFunds

We provide our services under the Global Note Programs through several entities that perform different activities. Among these entities are FlexFunds ETP LLC which acts as Calculation Agent, and FlexFunds Ltd, which acts as the Program Coordinator. Before making a decision to invest in the Global Note Programs, you should consider the following:

  1. Independent entities. FlexFunds ETP and FlexFunds Ltd. are not managers of the special purpose vehicles, collectively, responsible for the issuance of Notes under the Global Note Programs.
  2. Coordinated Activities. FlexFunds ETP and FlexFunds Ltd act as coordinators of the different entities participating in the Global Note Programs. However, each of the entities is responsible for its own duties and activities in the process.
  3. Not Broker-Dealer or Investment Adviser. Neither FlexFunds ETP nor FlexFunds Ltd. is a U.S. registered broker-dealer or an investment adviser registered with the U.S. Securities and Exchange Commission. Our entities do not raise capital for clients or the Issuers. We do not solicit any specific products, nor offer investment advice or make investment recommendations, nor do we offer tax, legal, financial advice or otherwise.

FlexFunds ETP may collect data about your computer or device, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes.