How to choose
Ask each candidate how much work they do for funds like yours: the same strategy, a similar size, and first-time managers in particular. Ask who will actually do the work, what the first year costs, and what changes the fee.
Speak to two or three in each role, and ask for clients who launched recently whom you can call. Investors’ due diligence questionnaires ask about every provider, so choose with that in mind.
Who does what
Fund counsel
Lawyers who design the fund’s structure and draft its documents: the limited partnership agreement, the private placement memorandum, subscription documents and side letters. They also advise on securities and adviser registration, and negotiate with investors’ own lawyers.
When: First. Most of the other decisions (structure, terms, where the fund is formed) run through them.
Questions to ask
- How many first-time funds of our strategy and size have you formed in the last two years?
- Who will do the day-to-day work, and what is their hourly rate?
- Will you quote a fixed or capped fee for formation, and what does it leave out?
- Do you defer part of the fee until the first close?
Fund lawyers · Lawyers for first-time funds · Lawyers for emerging managers
By strategy: Private Equity Fund Lawyers, Venture Fund Lawyers, Private Credit Fund Lawyers, Real Estate Fund Lawyers, Infrastructure Fund Lawyers, Hedge Fund Lawyers, Secondaries Lawyers
Auditor
An independent accounting firm that audits the fund’s annual financial statements. Investors expect audited statements, and a registered adviser usually relies on them to meet the SEC custody rule.
When: Before the first close. Investors’ due diligence asks who the auditor is, and the first audit covers the fund’s first year.
Questions to ask
- How many funds of our strategy do you audit, and how many are first-time funds?
- What does the first year’s audit cost, and what moves the fee?
- When would we have the audited statements after year end?
- Who on your team values the kind of assets we will hold?
Tax adviser
Accountants or lawyers who plan how the fund, the general partner and the management company are taxed, prepare the fund’s partnership returns and the K-1s investors need, and advise on structures such as blockers and feeder funds for tax-exempt and non-US investors.
When: During structuring, alongside counsel, and again before the first tax year closes.
Questions to ask
- Will you prepare the fund’s returns and K-1s, or only advise?
- How do you handle tax-exempt and non-US investors in a fund like ours?
- What is the timetable for K-1s, and how often do your clients extend?
- Can you advise on the carried interest and the management company, too?
Fund administrator
A firm that keeps the fund’s books and runs its investor operations: capital calls and distributions, each investor’s capital account, quarterly statements and reports, investor onboarding and anti-money-laundering checks, and the records the auditor and tax adviser work from. Some managers do this in-house at first; many institutional investors expect an independent administrator.
When: Before the first close, so the first capital call and the investor onboarding run on the system that will keep the records.
Questions to ask
- Which services are in the fee, and which are charged separately?
- How do investors get their statements and documents?
- Who reviews the work, and how quickly are capital-call notices turned around?
- Which reporting templates (ILPA, for example) can you produce?
Bank and fund finance lender
A bank for the fund’s and the manager’s accounts and, often, a subscription line: a loan secured on investors’ unfunded commitments that lets the fund close deals before calling capital.
When: Accounts before the first close; a subscription line once the fund has investors whose commitments a lender can rely on.
Questions to ask
- What do you need to open accounts for the fund, the GP and the management company, and how long does it take?
- Do you lend subscription lines to funds of our size?
- What would a line cost, and how is the borrowing base set?
Compliance consultant
Specialists who help a manager meet adviser regulation: Form ADV, the compliance manual, the code of ethics, marketing rules, annual reviews and, for a registered adviser, a chief compliance officer’s programme. Some managers hire a CCO; many first-time managers outsource the work.
When: Before the manager files with the SEC or a state, and before any marketing begins.
Questions to ask
- Do you act as outsourced CCO, or support one of ours?
- What does the first year cost, including the mock exam and annual review?
- Which of your clients are exempt reporting advisers, and which are registered?
Placement agent
A broker-dealer that raises capital for the fund in exchange for a fee, usually a percentage of the commitments it brings. Agents choose carefully which first-time funds they take on, and many first funds are raised without one.
When: Once the strategy, track record and terms are ready to be tested with investors.
Questions to ask
- Which first-time funds have you raised in the last three years, and how did they close?
- Which investors would you introduce us to that we cannot reach ourselves?
- What is the fee, is there a retainer, and which investors are excluded from it?
The directory lists fund lawyers, auditors and tax advisers from their firms’ own bio pages. Nobody pays to be listed or to rank, and we do not recommend providers.
Checklist: service providers
- Fund counsel engagedUsually the first hire.
- Tax adviser engagedBrought in during structuring.
- Auditor appointedInvestors ask who it is before they commit.
- Fund administration decidedAn outside administrator or a documented in-house process.
- Bank accounts openedFor the fund, the general partner and the management company.
- Compliance programme in placeAn in-house or outsourced CCO, manual, code of ethics.
- Insurance quotedCommonly management liability and errors and omissions cover.
Terms worth knowing: Fund administrator, Placement agent, Subscription line, AML and KYC, Schedule K-1, DDQ.
Talk to someone who has done it
Tell us what you are launching and what you need. We will introduce you to lawyers, auditors, tax advisers or a manager who has raised a first fund. Free, and we take no referral fees from anyone.
Ask for an introductionThis 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.