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How many funds should I launch? When should I launch my second? Today we’ll answer these questions, but let’s start off with rule #1…
Always start with one asset. Don’t spread yourself too thin.
Assuming you’ve made it that far, let’s explore your options.
Check out my youtube video to learn more about launching funds!
Real Estate & Launching Products
Let’s take a look at real estate. The typical lifetime of this fund can be anywhere from 3 to 10 years, and it is made up of 3 phases: acquisitions, value-add, and disposition.
The acquisition period of your first fund should last 2-3 years. As soon as this phase ends, it will move on to value-add.
When this happens, it is time to launch another fund into phase 1.
This way, you can focus on the acquisitions of one fund at a time.
Just like launching “flagship products” in a business, you can launch multiple “flagship funds” that attract a variety of investors.
However, before getting caught up in launching too many new subsets, remember that (1) you need to establish yourself as an expert in something and (2) ensure that your capital meets your capacity.
If you have the demand, then yes, launch new funds! Do not bring your investors 5 different funds if you are not finishing your target raise on any of them.
Growth-Oriented & Income-Related
When giving a platform of products to your investors, there are two fundamental types of funds to offer:
- A growth-oriented fund – trying to increase the IRR as much as possible
- An income-related fund – focuses more on rents and paying out more frequent distributions
Venture Capital & Private Equity
Although VC and PE follow a pattern similar to real estate, consider the following…
Venture looks a lot like real estate, except you most likely won’t have different products.
Private Equity follows the same pattern and usually the strategy, types of companies, and objectives are already determined.
What’s the difference between open and close-ended vehicles?
In theory, open-ended vehicles don’t have a foreseeable end while close-ended vehicles do.
For example, Hedge Funds and Crypto-related funds are open-ended because once started, they will go and likely not stop.
When should I start a second Hedge Fund?
If you have the demand and the surplus, go ahead. However, as I said in one of my videos…
“I encourage you to just start with one product, one thesis, and one strategy, and just grow that. Once you’re successful, you can then start introducing different products.”
Lincoln Archibald
Listen to your investors! What is the market asking for? Communicate with them and understand what is going on and get on the same page as them.
In the end, it’s totally up to you when to start your next fund, but keep in mind that there are many strategies to consider.
We’re excited to help you launch those fund 4’s and fund 10’s!
Have a great day!
Want to get direct guidance for your fund? Schedule a time with my Fund Advisors!
DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the authors.
