Break even is about 20-25m, sub managers already picked out. Should I go for an anchor LP first or instead just spend the money on legal and start raising and generating returns?The cap constrain is $500M, then the strategy might have to add more partners. I’m also fine with accredited investors but want a lockup from like a $500k-$1M investment.QP and institutional definitely more leeway they generally know what they are doing. Wave management fee on first 25m anchors seems to be a good incentive?
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If you can and have the balls be your own anchor so to speak. If you can set up the legal and have everything done, that makes finding an anchor LP that much easier. It’s a big confidence signal for an LP to see you are already up and running and generating real returns. They like to see winners who would win even without them and then they can just throw in some money and ride coattails.
Good luck 🍀
My problem is I’m not that rich to start the fund, though the funds are actually quite well with institutional LPs, but vastly different strategies.
I’m looking at like $150k initial startup cost for legal and paying myself $50k lol, which I think if you get the commitment for 20 and offer lower management fee this could work.
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I think the better question would be - what makes you a better fund to write to vs any other FoF that's already well-established and has access to top funds and by extension the talent that's exiting to start new ones? It's going to be hard af no matter what you're raising a fund for, but I feel like it'd almost be harder for an new FoF than a new HF because at least for the latter you'd assume the person has a good enough track record to think they can do it in the first place vs you've already admitted above you're not rich, so you can't exactly have a track record to have been investing in multiple managers in a way that could speak to your capability as a FoF manager.
I used to work with a lot of these single managers who would be the sub funds. They manage institutional money, and I got some weird idiosyncratic and completely not market related alpha strategy that funds would like.
Just want to do a smaller raise, $25M seems like the break even check size. The sub funds all have 20+ year track records which is nice.
At that size idk if I'd even call it a fund, more like a 1-off (diversified?) investment vehicle. My question then becomes why would these managers want your money vs just go to some bigger fund that can write bigger checks? Could they even take bigger checks or are these very small, niche operations they're running? Who are the LPs you'd be pitching to? Because this is too small for institutional, maybe a fit for smaller regional wealth managers or something. If there's genuine alpha to be had that you can explicitly lay out to LPs as to why it's better for them to invest with you, I suppose I could see it working out. But I'd have a lot more questions... Regardless, good luck!
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The thing is all the sub funds have 20+ track records and are pretty well known in the industry.
Wouldn’t try to fee layer too aggressively either.
The question is, if the sub funds are name brand and supportive of this, should I give it a go?
None of the sub-fund managers thought spending before like an anchor was smart.
I misunderstood the original post, thought you were looking to ask FOHFs for capital, rather than actually launch and raise a FoHFs.
It's a highly uncommon situation. If you can provide access to hard-to-access HFs, it could work. Like some others have mentioned, it's weird why they'd choose to partner with you when given their track they probably have easier and more meaningful ways to raise capital. Ultimately you'll know better than us what they see in you that makes it worth it for them.
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