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Stage 5 of 6

The first close

The first close is the day the fund legally exists with investors in it. The investment period and the management fee usually start here, and the fund can begin to invest. Everything that runs the fund has to work from this day.

Typical time: The last few weeks before the date are the busiest; later investors join at subsequent closes, usually within twelve to eighteen months.

What happens

Investors sign their subscription documents, the general partner accepts them, and the LPA is signed. Each investor is checked against anti-money-laundering and sanctions rules and confirmed as eligible to invest. Side letters are signed, and investors with most-favoured-nation rights are offered the terms others received.

The fund then issues its first capital call, and the money arrives in the fund’s account. Investors who join at later closes usually pay an equalisation amount so that everyone has paid in the same share of their commitment.

Filings to diary

A Regulation D offering requires a Form D filed with the SEC within 15 days after the first sale of interests, and many states require their own notice filings. The adviser’s filings (Form ADV, and Form PF for some registered advisers) follow their own timetable. Counsel keeps the list; make sure someone owns each date.

Checklist: first close

  • Collect signed subscription documentsWith each investor’s eligibility answers complete.
  • Complete investor AML and KYC checksBefore money is accepted.
  • Sign side letters and run the MFN processTrack every promise made to every investor.
  • Sign the LPA and hold the closingCounsel runs the closing checklist.
  • File Form D and state noticesForm D is due within 15 days after the first sale.
  • Issue the first capital callNotices, wire instructions confirmed by phone, receipts recorded.
  • Set up each investor’s capital accountCommitments, contributions and fees from day one.

Terms worth knowing: First close, Capital call, AML and KYC, Side letter, MFN clause, Equalization, Accredited investor, Commitment.

Recent first funds in the news

Closes and launches of managers’ first funds, from our reporting.

All fundraising news

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This guide explains how fund launches commonly work. It is not legal, tax or investment advice: rules differ by fund, investor and place, and change. Speak to your own lawyers and tax advisers before you act.