Tips For Establishing a Private Equity Fund

With almost two decades of experience as an attorney in fund finance, Zac Barnett has represented several investment banks and fund sponsors on complex fund financings. Due to his expertise in developing profitable financing strategies, he was recognized in the US Chambers and by the IFLR1000 Americas. As a globally recognized private equity lawyer and co-founder of Fund Finance Partners LLC, Zac Barnett represents lenders and borrowers connected with hedge fund financings, private credits, secondaries, private equity funds, etc.

Private equity funds are regarded as closed-end pooled investments generated to raise funds for businesses. Usually managed by general partners, private equity funds are generated by qualified or institutional investors. Establishing a private equity fund comes with a lot of risks and benefits; hence, it is important to deeply understand the structure of the fund.

Since the fund gives wealthy individuals the right to own equity in the companies they invest in, first-time general partners must first establish the terms of investment with potential investors (limited partners). Once the terms have been specified, the following tips can be followed to establish a thriving private equity fund:

1. Develop the business plan for the fund to ascertain certain variables, including marketing strategies, investment strategy, fund’s duration, budget, cash flow system, etc.

2. Consult expert attorneys to finalize all paperwork and establish necessary legal agreements.

3. Decide on the investment fees needed to start the business.

4. Source for potential limited partners willing to look beyond the present status of the fund and invest in its promising future.

5. Identify workable business models like the Environmental, Social, and Governance (ESG) strategy to guide investment decisions.