If the answer to either of these is no, then you should wait. If the answer is yes, then start putting a plan together that considers the requirements for getting your fund off the ground coupled with how you will pitch your strategy to investors. Launching a fund in any environment is costly and demanding, but doing so at the wrong time is a poor business decision and timing is truly everything in our industry.

Although Investors are actively monitoring funds and making allocations today, they are exceedingly more selective and historically to expedite the process it helps tremendously to have a pre-existing relationship with a firm or individual that can seed or back your strategy – that is unless you can self-fund. If you have already started slowly building a track record and a portfolio construction process, investors will also request to see what your Q1 2020 results look like in particular if you are a more liquid strategy. If you are focused on putting together a fund with a longer investment horizon such as a private equity or venture capital fund, be prepared to have (1) solid portfolio targets that have been modeled out to consider the new reality we live in, (2) what you distinctly bring to the table and then (3) outline why the investor is the right fit for your fund based upon what you know about their criteria.

There are several funds launching and getting funded, but many of those were discussions which were had months and even years prior. That means do not always immediately assume just because a launch announcement has been publicly released that it was something that happened overnight. Many funds spend anywhere from 6 to 24 months building their portfolio and team before even formally announcing. It is important to remember this in deciding whether launching right now is the best move for you.

As people grapple with the current Coronavirus environment which we are operating within is going to be long-term, allocators will look to how your fund can fit into those plans and their underlying portfolio. This is important when you are building out your pitch to investors because they are always seeking more reasons to say no than yes, so consider all of the factors when you score that first or even second meeting.

You must be prepared to offer details when asked. Here is a solid list of the types of questions in no particular order that you should have pre-prepared ahead of going into these meetings:

#1.) What is your long-term strategy? How does this play into your business and investment strategy AND even more importantly the investor’s underlying portfolio construction process?
#2.) What has your performance been these past few months and how do you believe it will project out given the current macroeconomic environment?
#3.) How does interest rates affect your strategy?
#4.) What is the operating costs to run your strategy? What is your breakeven and/or burn rate?
#5.) What is the risk profile? If you are too risky, many investors may take a ‘wait and see’ approach.
#6.) How liquid or illiquid is your strategy? What is a typical holding period for any particular opportunity? If you are more illiquid than your peers be prepared to explain why? This is very important.
#7.) What are your fees? Be prepared to offer competitive fee terms for early investors.
#8.) What type of tax considerations does your fund offer? Taxes are always a hot topic with investors, but not always addressed by fund managers.
#9.) What is your background and who is on your team? Have you done what you are targeting to do before, if not then it will be incredibly difficult for you to raise capital from family offices and institutions.
#10.) What types of geographic exposures does your fund have? Especially in today’s operating environment, how you invest is just as important as where you invest.

These are only 10 questions of the innumerable inquiries that will be posed to you as you present your fund. It is important to remember that it can be done, but the hurdles are high and you must have a meaningful track record – even if portable – if not from the fund itself than from your previous firm.

The ‘take a chance’ mentality is not commonplace during this time of uncertainty. Allocators want yield and diversification. They want to make certain they are partnering with fund managers who understand how to build a portfolio, a team and a business not just one of the three. This is a long-term relationship and they want to feel comfortable in knowing that you have made sure to take the necessary precautions while also being able to capitalize on opportunities.

Does this sound like what you are offering?