If you’re getting ready to start a fund, make sure you’ve taken the time to consider all your options.
After all, it’s easy to go with the traditional model that people have used for years. But depending on your situation, there may be a better alternative available.
A customizable fund has several key advantages that traditional funds do not. If you’re just starting out as a capital raiser, want more flexibility than a traditional fund, or are just looking for a way to reduce your costs, then a customizable fund may be the best option for you!
Here are five questions you can ask yourself to determine if a customizable fund or a traditional fund is the right choice for your capital raising:
1. How Much Experience Do I Have?
Traditional funds are a powerful capital raising tool, but fund management requires years of experience and a history of successful deals. Because investors don’t have control over their capital, they’ll want to see that you have a proven track record of success in a specified asset class, so they can trust you with their investments.
Traditional funds also require an enormous amount of upfront capital, so if you’re not already a successful capital raiser, you may not be able to afford to launch a fund.
For this reason, many capital raisers will start out doing syndication deals to build their track record.
But with a customizable fund, you don’t have to wait. You can launch a fund today and scale it over time. And because investors have full control over the deals they allocate capital toward, they’re much more likely to trust you even if you’re just starting out.
2. Do I Have an Established Investor Base?
A traditional fund can work well for capital raisers who have a large, pre-existing investor base. But if you’re looking to build up an investor base over time, a customizable fund makes it much easier to do so.
Traditional funds must have a definitive start and end date, so unless you have an audience who’s ready to deploy capital quickly, it can be difficult to hit your fundraising goals.
A customizable fund, on the other hand, is evergreen and can last as long as you need it to.
3. How Long Do I Want My Fund to Last?
If you’re raising capital for a specific set of deals during a defined time period, a traditional fund may give you the structure you’re looking for.
But if you’re continuously raising capital for a variety of deals, a customizable fund is a much more cost effective solution. These funds eliminate the hassle — not to mention the expense — of needing to start over each time one fund ends and you’re ready to start a new one.
Plus, you’ll only have to onboard each of your investors once!
4. What Types of Deals Am I Doing?
You probably know what asset class you’ll be raising capital for in the near future, but what about a year from now? Or even five years?
If a new opportunity in a different asset class presents itself, would you be interested in pursuing it?
A traditional fund can only house one asset class and business model at a time. With a customizable fund, on the other hand, you can include any asset class all within one fund, and adjust the business model and returns on a deal-by-deal basis.
This frees you up to pivot with ease and take advantage of as many new opportunities as you like.
5. What are My Investors Looking For?
What makes an investment opportunity appealing to your prospective investors? Some people like the idea of giving their money to a trusted fund manager who can then invest it as they like.
But more and more, investors are looking for a chance to control how and where their capital is allocated.
A customizable fund makes this possible, and as a result, many of our fund managers find that it’s easier than ever to find investors for their deals.
And Avestor’s platform is so easy to use that even the most passive investors don’t find it too complex or challenging. It’s truly the best of all worlds.
Accelerate Your Fund Growth with a Customizable Fund
If, after answering these questions, you think a customizable fund is the best option for your business, then you’re in the right place! Avestor is the creator of the original customizable fund, and we’ve helped more than 50 fund managers like you launch and grow their funds.