Running a fund using holding company structure

[ikur1]

Hey all,

been doing some research on fund management.
The usual structure is create a company as fund manager and create a ltd partnership as the fund.

However,
I was just thinking if you start a holding company and hold ordinary shares for yourself and just issue redeemable preference shares to investors, you'll retain control and have the say in managing the fund

however note that the investors are technically investing into a company through pref shares and by law you are not providing service to investors like a traditional licenced fund manager does and thus you do not need a licence in this structure

am I missing anything here?
Buffett's company structure is also a holding company

 

[morgs]

Hey all,

been doing some research on fund management.
The usual structure is create a company as fund manager and create a ltd partnership as the fund.

However,
I was just thinking if you start a holding company and hold ordinary shares for yourself and just issue redeemable preference shares to investors, you'll retain control and have the say in managing the fund

however note that the investors are technically investing into a company through pref shares and by law you are not providing service to investors like a traditional licenced fund manager does and thus you do not need a licence in this structure

am I missing anything here?
Buffett's company structure is also a holding company

There is good reason to hive off the fund from the investment manager, firstly the investment manager who takes the role of the general partner in the LLP will not effect the solvency of the fund and visa versa. With limited partners the deed can be drawn up exactly limiting or creating obligations to the Limited partners as investors, i.e. we need money now etc. You can't do this with shares as the Directors owe a strong duty of care to the shareholders and can persue the directors if they feel that the funds performance has arrisen as a duty of care. In Buffets case you are looking at the very top of the tree and there will be many vehicles below and it is an old trading company.

In respect of licensing this is how many private equity vehicles work, and they are not licensed however just to give you an idea of getting one off in the channel islands you will not see any change from £50k.