In this article, Simon Page, our Global Head of Fund Services, reflects on a recent conversation with one of his clients, and highlights some of the key challenges and considerations facing first-time fund managers.
Hawksford has had great success over the years in helping managers launch their first private capital funds. Our position within the wider Jersey ecosystem of multi-disciplinary experts and our established relationships with these trusted partners, has allowed us to support numerous new managers, many of whom have gone on to launch much larger vehicles.
We have seen a broad range of challenges faced by new managers on a day-to-day basis, from the initial structuring and fund raising stages, through to launch, daily operations and governance, and ultimately to the exit process.
Below are some of the key challenges and considerations which my client and I discussed as being of particular significance for any new managers.
Most new managers have an investment and fundraising strategy in mind. They are likely already an expert in the sector and will already understand the parameters to ensuring future success, having possibly come directly from a large PE house with a well-established internal infrastructure in place.
Most new managers also understand that investors look to them for added value and growth opportunities, in addition to the already high expectations of financial returns.
To allow this added value to manifest, new managers need the bandwidth to focus on the running of the fund, particularly if they are already dealing with the regulatory licensing process and the relevant controls required.
The removal of the administrative burden through outsourcing allows the manager to focus on what they do best, fund raising and fund deployment, and enhances operational efficiencies.
For any new manager, budgeting, cost estimation and expense management can quickly become all-consuming tasks.
Finding a high-quality outsource partner allows a manager to dilute costs in terms of people, technology, process and control environment. It takes away the torment of difficult and expensive back-office recruitment (something that has been exacerbated post pandemic in the hybrid working world), while ensuring access to best-of-breed technology platforms, processes and controls – all without the up-front expense of implementation.
Hawksford has invested in its people, technology and process to ensure we can fully support new fund managers; we have quickly adapted our offices globally to a hybrid-working model, revamping our onboarding, training and mentoring processes.
Another key consideration is the fact that first-time managers typically spend longer in the market when getting the targeted capital in place to launch.
While most investors are quick to realise that new managers will often provide a source of added value and growth opportunities, they’re also aware that they will typically spend more time on the due diligence process, making sure they select the right partner capable of delivering these opportunities.
Ensuring all of the relevant documentation is in place, patience, differentiating factors, previous track record, and so on, are all crucial to getting an investor over the line, but additional comfort can come through the selection of a high-quality outsourced service provider.
Investors will take comfort in the manager having a quality, independent administrator in place on day one, especially in consideration of corporate governance.
Having the right administrative processes, procedures and infrastructure in place from the outset is something that should not be overlooked.
Hawksford has extensive experience in developing bespoke solutions to suit the needs of new managers and their investors. We work closely with managers to support them in achieving their objectives – particularly as investors are becoming increasingly focussed on data, and demanding greater visibility into fund performance.
Just as important as selecting a trusted, high-quality service provider, is the selection of domicile. Choosing the right jurisdiction to domicile a new fund is crucial, and not just in terms of thinking about the ease of operation or operational cost factors.
With its political and fiscal stability, and a no-change outlook from a regulatory, legal and economic perspective, Jersey is a destination of choice for fund managers choosing where to locate their funds and/or management companies.
Even as the international regulatory and legislative landscape constantly evolves, Jersey’s funds regime reacts with agility, offering managers a full spectrum of regulatory options, in addition to providing significant flexibility for investor needs.
But managers still need somebody to get it right and to not drop the ball when it comes to regulatory compliance, corporate governance and so on – this is particularly the case for new managers, as they begin to build their reputation and establish a good track record.
Jersey offers an exceptionally large pool of expertise across all disciplines, delivering perfectly tailored products and specialist vehicles, whatever the investment objectives.
Over the course of the next few months, we will re-visit this topic and pick apart what Hawksford views as some of the key areas to consider when launching a new fund in a little more detail.