Launching your first fund: Seven key considerations for emerging managers

Whether you’re spinning out of a well-known asset manager, transitioning from a trading desk or capitalising on a strong track record in a niche strategy, setting up your first investment fund is a critical moment of transition. Success depends not just on performance, but on planning, structuring and executing.

But what should you do first?  How best to make those first steps to go from dream to reality?

Clarify your strategy and market position

Before engaging corporate service providers or fund administrators, carefully consider and refine your investment proposal. What makes your strategy differentiated, scalable and compelling to institutional and/or sophisticated investors? Are you focused on a concentrated long-only equity strategy? Digital asset arbitrage? A private credit vehicle targeting niche sectors, perhaps?

Investors look to get behind people and process, not just past performance. Your fund should have a clear and defensible USP, supported by robust investment processes and parameters, as well as risk management discipline. Consider also:

• Strategy, scalability and liquidity profile
• Track record, portability and attribution
• Team credentials (and any gaps)
• Sector or geographic specialisation

Be prepared to explain not just how you invest, but why your approach will succeed over time and prepare your slide deck accordingly.

Jurisdiction, structure and regulatory strategy

Selecting the appropriate fund domicile is one of the most important early decisions. For most emerging managers, flexibility, cost-efficiency and credibility are key. The Channel Islands, the Caribbean and Ireland are all well-trodden paths, each with pros and cons depending on target investor base, asset class and regulatory profile.

Some key structuring considerations include:

• Regulatory framework: Will the fund be regulated or unregulated?  Private or institutional?
• Marketing strategy: Will it be marketed within private placement regimes or seek a broader marketing passport under AIFMD?
• Entity type (or types): Should the fund be a limited partnership, unit trust or a corporate vehicle? Will you need feeder funds or parallel vehicles to accommodate US and/or non-US investors (depending on where you're setting up)?
• Tax neutrality and efficiency: Ensure tax counsel is engaged early, particularly if you intend to use carry vehicles or co-investment arrangements for you and your team.
• Costs – Does the jurisdiction you prefer offer regulatory solutions that are not too costly, such as the Private Investment Funds Regime in Guernsey or the Jersey Private Fund?
• Speed to market – Is the application process fast?  Can your chosen administrator and the local regulator respond to a timeline that works for you?

Seed capital and fund economics

Securing initial capital (ideally from a cornerstone investor who brings more than just capital) is vital. Be transparent about how much you’re committing personally (if any), and whether early investors receive preferred terms (e.g., discounted fees, capacity rights, or founder share classes).

Consider:

• Management fees and expenses: Will your fee cover operational costs in year one? What’s your minimum target AUM?  Will you amortise costs over a longer period?
• Performance fees and hurdles: Are they appropriate for your strategy and competitive with the market you're going into?
• GP/management commitment and alignment: Investors often want to see meaningful 'skin in the game' from the manager.

Infrastructure and service providers

The investor experience is built as much on your back-office as it is by your slide deck. Regulators and institutional investors will take a close look at your processes, procedures, investor relations portal, etc. Establish early relationships with high quality, experienced service providers, including:

• Fund administrators
• Prime brokers and custodians
• Auditors and legal counsel
• Regulatory compliance consultants (if needed)
• Technology and cybersecurity specialists

The goal is to build a cost-effective, efficient but ideally institutional-grade platform, ready for investor and regulatory scrutiny. You may outsource several important functions but never forget that oversight and governance remain the responsibility of the board of directors (especially important if you are on said board).

Governance, compliance, and risk management

Whether fully authorised, lightly regulated or entirely unregulated, funds need clear governance frameworks. This includes:

• A properly constituted board or investment committee
• Practical conflict of interest policies
• Valuation procedures
• AML/KYC protocols
• Cybersecurity and data protection measures

Marketing, investor relations and growth strategy

Raising capital is a full-time job. You may need a slide deck or pitchbook, a data room, an investor portal and perhaps a Client Relationship Management system for tracking investor engagement.

Focus first on 'warm capital': existing relationships, family offices or trusted connections. As your track record builds, you can layer in institutional fundraising or engage with placement agents.

Consider a multi-stage growth trajectory:

• Fund I: proof of concept
• Fund II: growth and institutional onboarding
• Fund III: scale and maturity

Choosing the right legal counsel

The seventh key consideration is choosing the right legal adviser to help you through this process.  At Walkers, we have extensive experience in guiding new promoters and managers through the set up and launch of their first funds and can provide advice on all aspects of the process including structure, regulatory overlay, service provider investigation and selection and carried interest holding arrangements.

We are one of the world’s largest specialist International Financial Centre funds teams – we deliver legal advice for investment funds in Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Irish and Jersey law on a global basis. Our clients range from well-established financial institutions to start-up managers – all trust us to help them successfully launch new products, keep abreast with regulatory change, and ensure that good governance is in place. 

Emerging managers who plan carefully, balancing ambition with realism, can build enduring investment fund structures. Instruct trusted advisors, communicate transparently with investors, and maintain discipline as a fiduciary.  After all, success is not only about outperforming a benchmark, it's about building a credible, durable investment business that can produce results for years to come.