How to raise funds using an investment fund
Whether your fund is registered in Luxembourg, Gibraltar, Cyprus, the Isle of Man, the Cayman Islands, Singapore or any other jurisdiction, its goal is the same: making it possible for you to raise funds on the markets. An investment fund is assigned an ISIN number which allows it to be traded freely, without geographical limitations.
Who can create an investment fund
Anyone setting up investments can seek to raise capital through an investment fund.
The creation of a fund starts with drafting a prospectus addressed to potential investors which outlines in detail the fund’s strategy, the nature of its assets, and the value and duration of the investment. This document, usually running into several hundred pages, is drafted by a lawyer skilled in the laws of the country selected for the fund’s creation.
Investment funds may be based on all types of ventures such as real estate, financial, mining, contracts, etc., or on any combination of these, as is the case with hedge funds, which can make investments of all types without any fixed rules.
How an investment fund works
An investment fund is a legal structure whose statutes are customized based on the fund’s functions. It may hold financial, fixed or liquid assets, the value of which determines the fund’s financial size.
Once structured and duly registered and assigned, investors may participate in the fund through the purchase of shares, which are deposited with the Custodian, the bank which holds the funds in escrow.
Managed by a Fund Manager and overseen by a regulator, funds provide a secure structure for investors in terms of oversight, organization, and stability.
Most investment funds are incorporated Offshore in order to benefit from zero taxes.
If you plan to use an investment fund to manage your own assets, which jurisdiction you choose is not important. However, if you wish to use the fund to raise money from other investors, a European jurisdiction such as Luxembourg or Gibraltar is highly recommended because of the security and image that it projects.
The main criteria differentiating Gibraltar and Luxembourg are related to the minimum amounts required to set up the fund. Luxembourg law requires a minimum startup capital of 1 million Euros, whereas Gibraltar is more flexible and allows an investment fund to be created with an initial capital of only 100,000 Euros.
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Different types of investment funds
Private Equity fund
A Private Equity fund, unlike a Public Equity fund, is made up of instruments that are not listed on a public exchange, even though the fund itself might be. Participation in the fund by individuals is limited. These funds invest in unlisted companies based on the fund managers’ investment strategies.
A Private Equity fund is a very widely used financial instrument and allows enterprises large and small to grow in the short and medium term.
A Mutual Fund is a fund in which a number of people take part as partners. They all hold shares in the fund, and invest their capital in it. A Mutual Fund can invest in all kinds of instruments, shares, bonds or other assets based on a strategy defined by the fund manager, who issues account reports to shareholders on a regular basis.
A Hedge Fund is an investment fund which pools monies from a number of investors. They are generally limited to 100 investors, and follow aggressive and dynamic investment strategies. The investment rule of a Hedge Fund is that there are no rules. The managers of the Hedge Fund are free to make investments of any kind providing they are certain that doing so will profit the fund.
We can set up funds of all types in a number of jurisdictions. Contact our Investment Fund expert (use email@example.com to set up a conference call), who will be happy to answer your questions.