INCUBATOR FUND FORMATION
For a manager without previous fund management experience or ready access to initial investor capital, an incubator fund provides a cost-effective way to build a marketable performance record using the manager’s personal capital. An incubator fund allows managers to fine-tune the trading strategy while creating a marketable track record. During the incubator fund formation, we advise our clients on important aspects of transitioning to a fully operative fund and have deep knowledge of all investment strategies and asset classes, including long/short equity, fixed-income, arbitrage, global macro, managed futures, event-driven, multi-strategy, quantitative, and sector funds (including healthcare, technology, energy, and others).
Properly prepared incubator fund documents should include specific management-level and fund-level formation documents and governing documents. Legal counsel should be prudent in providing fund-level governing document terms that closely follow the eventual fund documents' allocation, distribution, and tax provisions.
Fund managers will use the incubator fund documents to open the necessary banking and brokerage accounts, to allow emerging hedge fund managers to begin pre-launch live trading with the fund manager’s capital. The incubator fund's appropriate structure permits it to convert to a hedge fund when it is ready to accept external capital.
Closed-end funds, including real estate funds, venture capital, and private equity funds, rarely use an incubator fund to build performance records, given that a closed-end fund cannot accept ongoing investments and requires several years to obtain performance returns. We have developed pre-launch services for closed-end emerging managers; learn more.
EXPERIENCED LEGAL COUNSEL & FLAT-FEE SERVICES
At Capital Fund Law Group, we focus our expertise and knowledge on investment advisory services, fund formation, securities law, corporate law, and taxation. Our client-tailored flat fee will take you from start to finish, assuring no unexpected, hidden charges during the formation process.
We concentrate our expertise on your specific legal needs, which may include various factors, such as structure, strategy, and terms. Our attorneys welcome an initial consultation to discuss your investment goals. During your consultation, we will detail our incubator fund services and customizable post-launch legal compliance program.
Please visit the link below for more information about incubator funds and their requirements.
The Purpose of an Incubator Fund
Schedule your complimentary consultation with one of our experienced attorneys to discuss the legal structure, regulatory requirements, timeline, and costs of forming an incubator fund.
Incubator Fund Resources
Information & Downloads
Forming & Operating a Hedge Fund | by John S. Lore, Esq.
Written by John S. Lore, Esq., managing partner and shareholder of Capital Fund Law Group, Forming & Operating a Hedge Fund is a brief guide for emerging fund managers. Click the button below to view and download the eBook on a mobile or desktop device.
This book provides a concise guide through the process of structuring, launching and raising capital for domestic and offshore hedge funds and other private investment funds. Throughout this book, we highlight pitfalls that fund sponsors should watch for and suggest best practices to safely and effectively navigate the process of forming and operating a fund.
Sample Hedge Fund PPM Excerpt | by John S. Lore, Esq.
This is a brief excerpt of a sample hedge fund Private Placement Memorandum (PPM) with footnoted explanations of the PPM provisions.
The PPM is based on a fictitious master-feeder hedge fund using a global fixed-income arbitrage strategy. The accompanying explanations discuss the reasons behind certain disclosure language as well as a more detailed examination of certain fund topics and how they apply to the disclosure document.
The excerpt also provides drafting tips, best practices recommendations, potential pitfalls and common mistakes in hedge fund PPMs.
Hedge Fund Investment Terms | by John S. Lore, Esq.
This white paper describes some of the most common hedge fund terms and how they apply to various hedge fund strategies.
One of the most important aspects of forming a hedge fund is setting the terms of the investment. When properly structured, hedge fund offering documents contain terms that adequately protect the fund sponsor and are attractive to investors. Hedge fund terms are driven by the fund’s strategy, the market trends within the fund’s asset class and the particular needs and objectives of the fund. It is crucial that the investment fund legal counsel has an in-depth understanding of current investment market trends and how those trends affect the strategy the fund will employ.