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Set up and run a fund through a holding company structure is possible, especially for starters?
Open a company as a holding company
own the ordinary shares by you
issue redeemable preference shares to investors so you maintain control
Run the business as if you manage the pool of money
So technically, the investors are buying into your company and by law you do not need licence since you are not providing service traditionally.
This would be very cost effective for budding managers to create a track record for a start.
Am I missing anything or is this perfectly fine?
Buffett’s structure is also a holding company
Asked on April 16, 2012 at 24h:24 am
Answers
April 30, 2012 at 12:08 pm
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Most funds are set up as limited partnerships or limited liability companies. The manager serves as the general partner/managing member and investors are limited partners/members and have no voting or control rights over the fund. The general partner/managing member maintains that control. This is in essence similar to a “holding company” in that the manager maintains control. Funds aren’t set up as regular “C” corporations because there would be two layers (corporate level and individual) of tax whereas the limited partnership or limited liability company is a tax flow through entity.