Simple Structure and Company Setup for Small-Scale Investment Management

[jakonda]

Hello do we have any 'investment managers' here or people who manage other peoples money?

I few months I just finished with my gardening leave period and thinking what should I do next. I'm in the early stages of exploring a venture into investment management, initially focusing on managing my funds which I already did and funds for friends and family. My goal is to start on a smaller scale, with the intention of potentially expanding to manage investments for a broader range of clients in the next 2-3-4 years.

Given this plan, I'm seeking advice on two key points first is Jurisdiction: Which jurisdictions are considered favorable for this type of venture, in terms of regulatory requirements, tax implications, and ease of setup? I'm looking for something on budget and simple, with some sort of operational flexibility and the second point is Company Structure i.e what company setup would best suit this business model? I'm interested in structures that allow for growth and can adapt to accepting outside investors in the future. This includes any specific recommendations for legal structures that are friendly to investment management firms starting small. I understand that professional legal and financial advice is crucial, so maybe if I want to move forward with this idea I might consult experts, however, since idea is still fresh I would greatly appreciate some insights from you guys I know we some top notch advisors here.

TL;DR
Looking for simple structure to manage other people's money (what jurisdiction and company setup?), Initial capital will come from myself and personal networks,

Thank you in advance for suggestions!

 

[CyprusLawyer101]

Managign other peoples money is a regulated activity. However if this venture would be hqndled amongst friends and family you could opt to do it through a normal limited co.

 

[nasdaqtradfiguy]

In similar situation, and a bit sad to see this thread isn't gaining any traction

My favourite proposals so far:
**Creating a ltd co in the Isle of Man - 1931 act.

**Scottish limited partnership.

**a seed hedge fund in BVI, Cayman, Cyprus/ Malta

 

[Borg]

In similar situation, and a bit sad to see this thread isn't gaining any traction

My favourite proposals so far:
**Creating a ltd co in the Isle of Man - 1931 act.

**Scottish limited partnership.

**a seed hedge fund in BVI, Cayman, Cyprus/ Malta

What do you mean by a seed hedge fund?

 

[nasdaqtradfiguy]

Apparently you can create a similar structure - simplified, for a fraction of the costs of the real thing...

I suppose open to any friends/family money you may raise at inception; and if you're successful/lucky, that track record may be taken more seriously than if it had been a personal account.

Perhaps because you can convert/ upgrade to a standard hedge fund structure and preserve the track record, which would be interesting in terms of marketing the fund in the open

Maybe the experiment HF would cost you 2/3/4 instead of 15/25k

 

[Yrybak08]

That’s what I do. Your biggest issue will be from a regulatory standpoint. You’d have to register and possibly pass licensing testing in most jurisdiction. Especially if dealing with securities or futures. It won’t be easy. It’s a long and painful process if you don’t know what to expect. Of course some jurisdictions are easier than others but you’d need to be careful where you’re raising funds and whether you’re soliciting and how. Even if you’re only managing friends and family funds. For example in the US, If you manage money for a friend and you charge your friend then you are considered an investment advisor. If so the investment advisor act of 1940 applies. If you are an investment advisor then you normally need to be registered.

 

[khinkali]

@nasdaqtradfiguy did you consider Gibraltar Private Fund? It's vey restrictive in terms of who can be in it, but so far it's the most appealing route I've seen for starting a small friends and family fund that can later be upgraded to EIF.

You need to consider the other end though, marketing restrictions. Places like EU have become very strict on what counts as 'reverse solicitation'.

Alternatively a Cayman segregated sub-fund avoids a lot of the the costs, capital requirements and hassle of DIY.

 

[nasdaqtradfiguy]

@khinkali any idea how much Gibs private fund would cost?
I asked solicitors last year but never got a response

 

[khinkali]

@khinkali any idea how much Gibs private fund would cost?
I asked solicitors last year but never got a response

This is old and out of date (e.g. restrictions changed on number of members) but gives some idea. Private Funds - Fund Management/ REITs - Gibraltar

To get it done by professionals looks like about £10k plus a bit over £10k per year, which is not much different from a sub fund in Cayman. Maybe add a lot of inflation though since that article.

It seems possible to do most of it yourself, which sounds a bit brave but maybe works if the fund is simple enough. I haven't gone further into it because crypto, which is advised against (though not forbidden) for a private fund and could require a DLT license which would add a lot of cost.

 

[nasdaqtradfiguy]

Thank you
Frankly, I don't see myself spending that kind of money for what it is.

I think a Scottish/English/Dutch private limited partnership would be a much simpler& better choice.

Have you looked into the former, SLPs?

In my case, it's only me...
With no prospect to raise any meaningful sum from family/friends. And if I do, it would probably be a loan.

 

[CyprusLawyer101]

A cyprus company can work for a small number or friends putting their money together.

 

[nasdaqtradfiguy]

That’s what I do. Your biggest issue will be from a regulatory standpoint. You’d have to register and possibly pass licensing testing in most jurisdiction. Especially if dealing with securities or futures. It won’t be easy. It’s a long and painful process if you don’t know what to expect. Of course some jurisdictions are easier than others but you’d need to be careful where you’re raising funds and whether you’re soliciting and how. Even if you’re only managing friends and family funds. For example in the US, If you manage money for a friend and you charge your friend then you are considered an investment advisor. If so the investment advisor act of 1940 applies. If you are an investment advisor then you normally need to be registered.

What exactly do you do?
You're running a licensed hedge fund? Care to share the name/sponsor/website?

Do you think Ackman had to pass any tests in "most jurisdictions"?

Or it's actually the financial advisors who must do, in those states where they'd like to have clients in?

 

[khinkali]

Frankly, I don't see myself spending that kind of money for what it is.

Sure, I just mentioned Gibraltar private fund because you thought to "upgrade to a standard hedge fund structure and preserve the track record".

Have you looked into the former, SLPs?

Maybe I'm wrong but I feel that a company will be easier.

 

[nasdaqtradfiguy]

The Scottish limited partnership exists as a legal entity, but is not taxed as such (because it's a partnership). You do it at personal level.

Whereabouts would you set up a company for an attractive tax treatment?

 

[CyprusLawyer101]

What can work as a fund structure is a pRtnership wuth one limited and one unlimited partner. This though should be looked at carefully as I doubt it would not fall within a regulated scope.

 

[khinkali]

@nasdaqtradfiguy this depends a lot on your residence jurisdiction. The right answer someone in Atlanta is very different from the right answer for someone in Tblisi.

 

[CyprusLawyer101]

@nasdaqtradfiguy this depends a lot on your residence jurisdiction. The right answer someone in Atlanta is very different from the right answer for someone in Tblisi.

True that!

 

[nasdaqtradfiguy]

Anywhere in Europe/ South America

Asian daylight hours don't match well with American trading hours--- NYSE/Nasdaq