Incubator funds are oftentimes ideal starting points for hedge fund managers that wish to achieve a marketable track record and gradually transition to a full-fledged. We help establish incubator funds for both domestic and offshore funds of all types of strategies and sizes. Our incubator fund services include:
- Preparing and filing the organizational documents to form the respective entities that will serve as the management company and the incubator fund
- Preparing an operating agreement for the management company
- Preparing a limited partnership agreement for the fund
- Reviewing any marketing materials prepared for the incubator and preparing a disclaimer for the presentation of the incubator’s track record
- Advising managers regarding full-fledged fund structures and the selection of service providers so that indications of interest can be obtained from prospective investors prior to preparing fund offering documents
Unlike a full-fledged hedge fund, an incubator fund is typically closed to outside investors and capitalized solely with the manager’s own assets. As a result, no offering literature is required during the incubator stage since no securities offering is taking place.
Incubator funds typically serve two purposes: (1) allow the manager to accumulate a marketable track record for the hedge fund and test out investment strategies; and (2) soft-circle prospective investors and develop a sense of the initial interest in the fund prior to incurring the full cost of launching a hedge fund. Although the time from forming an incubator to launching a full-fledged fund will vary from fund to fund based on a variety of factors—underlying strategy, fund returns, manager’s budget, etc.—typically a six- to twelve-month track record of market outperformance would provide a solid foundation for transitioning to a full-fledged fund.
If you have any questions regarding our incubator fund formation services or would like to schedule a free consultation, please do not hesitate to contact us.