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Investment Company Business Plan

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Investment Company

Executive summary executive summary is a brief introduction to your business plan. it describes your business, the problem that it solves, your target market, and financial highlights.">.

This sample plan was created for a hypothetical investment company that buys other companies as investments.  In this sample, the hypothetical Venture Capital firm starts with $20 million as an initial investment fund.  In its early months of existence, it invests $5 million each in four companies.  It receives a management fee of two percent (2%) of the fund value, paid quarterly.  It pays salaries to its partners and other employees, and office expenses, from the management fee.

The investments show up in the Cash Flow table as the purchase of long-term assets, which also puts them into the balance sheet as long-term assets.  You can see them in this sample plan, in the first few months.

In the third year, one of the target companies fails, so $5 million is written off as failure.  You’ll see how that looks as a $5 million sale of long-term assets in the cash flow, and a balancing entry of $5 million in costs of sales in the profit and loss, making for a loss and write-off that year.  The result is a tax loss, and the balance of investments goes to $15 million.

In the fifth year, one of the target companies is transacted at $50 million.  You’ll see in the sample how that shows up as a $45 million equity appreciation in the sales forecast, plus a $5 million sale of long-term assets in the cash flow.  At that point there’s been a $45 million profit, and the balance of long-term assets goes down to $10 million.

This is a simplified example.  The business model holds long-term assets and waits for them to appreciate.  It doesn’t show appreciation of assets until they are finally sold, and it doesn’t show write-down of assets until they fail.  Sales and cost of sales are the appreciation and write-down of assets, plus the management fees.

The explanation above has been broken down and copied into key topics in the outline that are linked to corresponding tables.  These topics are:

  • 2.2     Start-up Summary
  • 5.5.1  Sales Forecast
  • 6.4     Personnel
  • 7.4     Projected Profit and Loss
  • 7.5     Projected Cash Flow
  • 7.6     Projected Balance Sheet

Investment company business plan, executive summary chart image

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Company summary company overview ) is an overview of the most important points about your company—your history, management team, location, mission statement and legal structure.">.

Content has been omitted from this sample plan topic, and following sub-topics.  This sample plan has an abbreviated plan outline.  With the exception of the Executive Summary, only those topics linked to key tables have been used.

The focus of this sample plan is to show the financials for this type of company.  Brief descriptions can be found in the topics associated with key tables.

2.1 Start-up Summary

This hypothetical Venture Capital firm starts with $20 million as an initial investment fund.  The venture capital partners invest $100,000 as working capital needed to balance the cash flow from quarter to quarter. 

Investment company business plan, company summary chart image

Market Analysis Summary how to do a market analysis for your business plan.">

Strategy and implementation summary, sales forecast forecast sales .">.

Investment company business plan, sales forecast chart image

Management Summary management summary will include information about who's on your team and why they're the right people for the job, as well as your future hiring plans.">

7.1 personnel plan.

This hypothetical company pays salaries to its partners and other employees, and office expenses, from the management fee of two percent (2%).

Financial Plan investor-ready personnel plan .">

8.1 projected profit and loss.

Please note that in the third year one investment is written off as a failure, producing a $5 million cost which ends up showing a loss for the year of nearly $5 million.  The sale of equity at the end of the period enters the sales forecast and the profit and loss statement as a $45 million gain. 

You will also note that there may be gains or losses in the value of the assets held as equity investments, but these gains or losses don’t enter the accounting until there is a transaction.  The accounting treatment is identical to what an individual investor does with stocks: changes in the market price of a share of stock are irrelevant until that share is actually sold to somebody else, or, if the company ceases to exist, that stock is written off as having no value. 

Investment company business plan, financial plan chart image

8.2 Projected Cash Flow

The Cash Flow shows four $5 million investments made in the first few months of the plan. 

In the third year, one of the target companies fails, so $5 million is written off as failure.  You’ll see that shows as a $5 million sale of long-term assets in the cash flow, and a balancing entry of $5 million in costs of sales in the profit and loss, making for a loss and write-off that year.  The result is a tax loss, and the balance of investments goes to $15 Million.

In the fifth year, another investment is transacted at $50 million.  This shows up as a $5 million equity appreciation in the Sales Forecast, plus a $5 million sale of long-term assets in the Cash Flow.  At that point there’s been a $45 million profit and the balance of long-term assets goes down to $10 million. 

The partners invest an additional $100,000 in the fourth year as additional working capital to balance the cash flow of the company. 

Investment company business plan, financial plan chart image

8.3 Projected Balance Sheet

You can see in the balance sheet how the ending balances for long-term assets were not re-valued.  They remain at the original purchase price until they are sold, or written off as a complete loss.  There is a $5 million write-off in the third year, and a sale of $5 million worth of assets in the last year.  That sale of $5 million in assets produces the $5 million sale at book value plus the $45 million gain in the sales forecast and profit and loss table.

8.4 Business Ratios

The Standard Industry Code (SIC) for this type of business is 7389, Business Services.  The Industry Data is provided in the final column of the Ratios table. 

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investment fund business model

Considerations for Raising Your Own Private Equity Fund

Starting a fund is an aspiration harbored by many financiers. While attention tends to focus on investing and deal making, the initial private equity fundraising process is riddled with uncertainty.

This guide presents the main considerations to take when raising a fund, covering the legal, accounting, staffing, and strategic roadblocks that will be encountered.

Considerations for Raising Your Own Private Equity Fund

By Martin Kemeny

Martin is an seasoned real estate and PE executive that has completed over $200m of projects and advised a range of Fortune 500 companies.

Previously At

Executive summary.

  • Funds provide a more secure capital base, allowing for longer-term planning and scaling of an investment operation.
  • Having discretionary, committed capital gives more flexibility to make quick decisions within opportunistic investing environments.
  • A fund structure allows for a manager to access debt instruments that can enhance its range of investment opportunities.
  • Managing investments under a fund umbrella provides more diversification benefits over single deal-by-deal investing.
  • Unlike single investments, a fund must prepare for the ramifications that a set of investments can have on a portfolio as a whole, in terms of costs, cash flow, and profits.
  • Thorough preparation of a fund’s strategy and commercial model will allow for you to undertake a number of scenario analyses to look at all possible performance outcomes.
  • A detailed budget and schedule for investments will minimize the effects of having too much or too little cash on hand. The ability to follow-on with investments and the overall percentage return of the fund will depend on this.
  • Planning the strategy and philosophy of the fund will also ensure that you can scale your human operations effectively. This will lower the time to onboard new staff and align them quickly with the goals of the fund.
  • Before marketing to investors, it is critical to understand the type of investor and money that can and cannot invest in the fund. Different investors have different levels of sophistication, desires, and legal protections.
  • Third-party agents can be used to help to raise funds. As with any kind of outsourcing arrangement, have all interests aligned and clear communication channels to ensure that your core message is being presented as you would intend.
  • Legal work for raising a fund can cost between $50,000 and $300,000. This is a necessary cost, but it can be minimized by ensuring that attorneys are utilized efficiently. Have drafts clearly prepared and agreed upon, to lower any repetition of time spent with counsel.
  • You do not necessarily have to invest your own money into your fund, but be prepared to make compromises in other areas of the fund’s economics, if you choose not to invest.

There comes a time in many investment managers’ careers when the next logical step is starting a private investment fund on their own. Either the manager has been working for others as an employee and now wants to go solo, has been investing their own money and wants to raise outside capital, or has been investing with others’ capital on a one-off basis and wants to scale. Whatever the reason, in many cases, the right answer is to set up a fund. A fund can stabilize an investment business and help the manager not only grow assets under management but also create a valuable investment platform.

Whether co-mingled or from a single investor, a fund has many distinct advantages over one-off capital raising:

  • Having a fund can provide a larger and more secure capital base for prospective investments, creating the ability to grow staff, resources, and profitability.
  • In today’s competitive investment environment, a discretionary fund may also allow a manager more flexibility to operate and make decisions quickly, facilitating quick investment closings.
  • A fund can allow a manager access to lines of credit or fund-level debt unavailable for one-off investments.
  • Funds with multiple investments provide diversification benefits, both to the manager and investors.

Many fund managers have built businesses and created substantial wealth through fund vehicles, and it might be the right next step for your business as well. The growth of the number of private equity funds over the past decade corroborates that raising a fund is an increasingly popular path to take.

private equity fundraising and number of firms has increased

All of that said, raising a fund requires a different mindset than managing money as an employee, as a personal investor, or through an informal syndicate. For a manager considering an investment fund, here is your primer on what to expect, what to think about, what questions to ask, and how to get it right the first time.

Understanding the Strategy and Operations of a Private Equity Fund

Beyond making successful investments, one of the greatest challenges for a first-time fund manager is understanding the mechanics of a fund’s operations and profit model. Creating a complete and thoughtful set of pro-forma financials early on is the best way to ensure that you will be successful, not just at raising and operating your fund but also at making a profit.

Profits, Fees, and Costs

One difference to consider when raising a fund is that the profit model is often significantly different from single or even multiple syndicated investments . Separate investments are often straightforward—the manager can figure out what the likely results are as well as the fees and profits that they can expect. They can also quickly assess how much time and cost is associated with managing the investment and, therefore, project a ballpark net profit figure accurately. Also, if a single investment in a pool of many fails to work out as planned, it will not generally alter the profitability of other investments.

Looking at the legal structure of a fund, there are many interrelated entities and directional flows of money that must be clearly understood before starting out. The image below shows an example of a typical private equity fund structure.

legal structure of a private equity fund

In planning for a fund, a manager has to assess not only a specific investment which is immediately available for detailed evaluation, but also future investments that are neither concrete nor available at the time the fund is raised. This makes it much more difficult to make profitability calculations and comprehend the likely financial results of a fund’s operation. Moreover, the timeframe on which investments will be made can also be difficult to project. Given that investment profits and fees paid to sponsors in many funds are based on when investments are made and how they perform, it can be much more challenging to estimate a fund’s revenues up front.

Costs are also a challenge to project relative to a single investment. Not only is it difficult to know up front the amount of capital that will be managed at any given time, it’s also difficult to estimate how many people will be needed to manage the investments and how much those people may cost.

Beyond the challenges associated with projecting a fund’s profitability, the fund structure in and of itself can complicate matters. As most funds are cross-collateralized across their investments, a single investment failure can have outsized implications on the bottom line of a fund sponsor, even if the fund investors are ultimately satisfied with the fund’s results.

Unfortunately, there is no easy answer in setting a fund’s revenue and cost parameters to make it work. Each fund is different based on its size, the investments it makes, the type of investors who participate, and the expectations of its managers. In addition, the capital markets often get an important vote, and there is always the danger of ending up being “the most profitable fund that was never raised.”

The best approach to dealing with these issues is to design the fund’s commercial model carefully, accounting both for likely outcomes and understanding the sensitivities to changes, unexpected events, and shifts in the market.

Cash Is a Drag

Another oft-cited challenge of managing funds is the ever-present issue of cash management. When making a single investment, the question of cash is usually uncomplicated. Funds are accessed when needed for the investment, never before. The question of holding cash reserves is typically limited to the manager, and the use of additional portfolio-level financing typically doesn’t exist.

For funds, it is more complicated. Funds, by contract, need to manage cash carefully. First, there is the danger of having too much cash. Because most fund profits are structured around the time value of money , having cash on hand, even for reserves, reduces a sponsor’s profits. This is because the fund investors typically get paid for every fund dollar called and in the fund’s possession, whether or not that dollar is invested. Given that many funds make their profit by outperforming a baseline return rate, this reduced performance can end up coming directly out of the fund manager’s pocket.

On the other side of the coin, funds need to concern themselves with having adequate reserves on hand to make follow-on investments , shore up or protect investments that are having challenges, and to cover unexpected costs that may come up during the fund term but after the investment period.

The chart below shows a timeline example of a private equity fund’s cash flows and the delicate balance that exists between capital drawdowns, distributions, and returns.

cash flow profile of a private equity fund

As with revenue and profitability questions, having a well-developed cash management plan can help a fund manager avoid potential challenges and set themselves up for success.

General Management

Another challenge for a new fund manager is setting the right investment criteria and planning for the fund. Outside of a fund context, an investor can pursue whatever they think will produce a good return, even if it is out of line with their historical investment strategy or their current investment plan.

On the other hand, even though most funds have “discretionary” capital, most fund agreements contractually define the limits of that discretion. While fund sponsors will often try to ensure that the definition is broad enough to allow them room to operate, sponsors that push for very broad discretion often fail to attract investors. The reason is that investors prefer funds that are focused on a certain investment strategy or asset class and have a clearly defined area of expertise and focus.

At the same time, too narrow a definition can be painful as well. The fund may end up foregoing good opportunities or becoming unable to place capital at all if the market shifts and its mandate no longer makes sense. Entangled with all of this is the type of investor the fund caters to and the degree of expertise and track record the sponsor brings to the table. A group of family and friends who have invested with the sponsor successfully many times in the past may trust it totally and give it wide latitude to choose investments, while an institutional investor may demand a very specific mandate or even require approval rights for every investment the sponsor makes. Therefore, establishing a strategy that is both achievable from an investment standpoint and salable to investors is a key aspect of a successful fund sponsorship.

Operational issues are also more challenging in the fund context, where the task of identifying, evaluating, and managing investments is no longer one that can be handled by the manager alone, and having a professional staff becomes important.

Staff allows for greater scale, but also becomes a management challenge as the professionals involved have to be properly hired, managed, and motivated. Often, there is also the challenge of effectively communicating the fund’s strategy, vision, and approach to making investments to new staff. What may have been a non-issue for a single investor or an established small team can become much more complicated and difficult when knowledge needs to be built into a process and philosophy that can be applied by a larger team—especially a larger team that may have had no part in developing the philosophy to begin with.

The answer to both of the challenges in this section is to have a clearly defined investment strategy before taking a fund to market or hiring staff. The strategy should, at a minimum, explain:

  • The type of investment the fund plans to make
  • What criteria those investments have to meet
  • Under what circumstances investments are to be reviewed and reconsidered
  • In what cases exceptions or variances from the core strategy are allowed, and what processes are in place to allow a fund to take on an out-of-strategy investment safely and with careful consideration

Be Aware of Securities Laws

If you plan to raise a fund in the United States, you may already know that fundraising through private equity is heavily regulated and that there are numerous legal and regulatory requirements that an investor must adhere to in order to be in compliance with securities laws. The SEC takes this compliance very seriously and a qualified attorney needs to be involved in the fundraising process early to make you aware of the rules and regulations associated with fundraising, investing, and managing the fund. Here are the key questions to ask when your attorney proposes a structure.

1. Who will I be able to raise money from?

Regulations offer various options for a sponsor raising money, primarily depending on and related to the type of investors, the type of marketing, and the amounts being raised. Typically, regulations create more hurdles and requirements for funds that intend to raise money from less sophisticated investors or where there is no prior relationship with the sponsor. The extreme of this is a publicly listed company that sells stock on an exchange to any member of the public—here, the requirements in terms of registration and public disclosure are the most stringent.

Before marketing a fund, it is important for a sponsor to understand who will be able to invest, in what amounts, and what the sponsor will have to do to market to these investors properly and validate that they are appropriate investors.

2. How can I raise the money?

In addition to understanding which investors can participate in a fund, a sponsor should understand how those investors may be approached to invest. Depending on the structure of the fund, a sponsor may be allowed to market the fund publicly or may be limited in outreach to only investors that the sponsor already knows or that meet a certain set of standards. This question can be further complicated if the sponsor hires a professional to raise funds , as they must ensure that it holds proper licenses to raise private equity on behalf of a third party.

The sponsor will also need to think carefully about what the message to investors will be and how it will be delivered. It’s important to balance the need to market and promote the fund with scrupulous honesty about what investors can expect. Many an investor lawsuit has started when expectations were not set appropriately , and an overzealous sales effort up front can be costly in the long run.

3. What kind of money can be invested?

Another concern is the type of money that a fund or fund sponsor can accept. There are a variety of restrictions in this area, but the two most common are investments from retirement accounts and investments from foreign accounts. Each of these areas creates downstream issues regarding the ways in which a sponsor can invest, manage, and report results to investors. Therefore, having a full understanding of the type of investor funds that can be part of the fund should be a key element of the marketing strategy. Speak with your attorney to learn how these choices may complicate or direct your efforts, both before and after the money has been raised.

4. How much will the legal work cost?

Each fund is different, and each attorney is different, but you can expect to spend between $50,000 and $300,000 in legal costs to complete your fund, and often more.

One way to manage legal costs is to have a comprehensive fundraising strategy before hiring an attorney. The fundraising strategy should include:

  • How much money the fund will target
  • Likely investors
  • The marketing channel for reaching investors
  • The fund’s investment strategy
  • Costs and other terms

By limiting the exploratory phase of fund formation, a sponsor can focus their attorney’s time and effort on key compliance questions, avoiding expensive discussions and rewrites.

Another strategy to control legal costs is to have your fund’s marketing materials and a draft of its investment strategy and cost structure ready for review as you begin the legal process. This will help an attorney not only understand more quickly what the fund is trying to accomplish but will also limit the time they need to spend reviewing and/or preparing fund documents.

Other Considerations

How long will it take.

Raising a fund can take substantially longer than raising money for a single investment. Depending on interest from investors and the timeline to complete compliance requirements, a sponsor should expect to spend at least six months on a fund, and the process can often take more than a year from concept to close. A large or complex private equity fund can take even longer.

What will investors look for?

Investor expectations vary by sophistication, goals, and relationship to the sponsor. Large, institutional investors, for example, are highly concerned with an investor’s track record and experience. Going to those investors as a new fund can be difficult. Smaller, private investors may be less concerned with track record but more concerned with a level of personal trust with the sponsor or access to an investment class. A sponsor should conduct an honest assessment of the fund’s strengths and weaknesses from a marketing perspective and set targets accordingly.

There are many different types of limited partners, ranging from large foundations and institutions to high net worth individuals. As the chart below shows , there is no overly dominant source of capital, and it is possible to be successful focusing on a variety of sources of capital. The key is to be selective and to target your plan, marketing message, and structure to your chosen audience.

composition of limited partner investors in a fund

Do I need to put my own cash in?

Investors are much more willing to invest in a fund if they know that the fund sponsor has capital invested along with them. That said, there is a range of expected fund manager investment levels depending on the fund’s structure, costs, management, and existing relationship with its investors. Nonetheless, if a sponsor is planning to make only a limited investment in the fund, that sponsor should be prepared to make concessions in other areas.

You Need a Profitable Model… with a Plan

Starting an investment fund of your own can be a profitable, useful step in building an investment business. However, an investment manager has many issues to consider up front before beginning the marketing and fundraising process. Doing this work before the fundraise begins will save significant time and cost, giving the fund the best chance of ultimately becoming successful.

Similarly, having professional assistance from experienced consultants and attorneys can facilitate the fundraising process, making sure a sponsor develops a fund program that is attractive to investors, remains in compliance with the SEC, and performs a successful fundraise in the minimum amount of time.

Disclosure: The views expressed in the article are purely those of the author. The author has not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report. Research should not be used or relied upon as investment advice.

Understanding the basics

What is a private equity fund.

Private equity funds are structured as limited partnerships that make equity (and occasionally debt) investments into companies. The fund is run an investment team, known as a “general partner.”

How do private equity funds raise money?

Private equity funds raise money from investors, who become limited partners (LPs) in the fund. These investors can range from large endowments to high net worth individuals. Commitments for investment from LPs are solicited through marketing roadshows.

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New Twist on Venture Capital with Better Risk-Adjusted Investment Returns

A higher return investment can have a broad distribution of potential outcomes, as conveyed by this graph from Howard Marks of Oaktree Capital Management (the graph is from his book The Most Important Things Illuminated ).

investment fund business model

Compared to traditional venture capital, I believe the investment strategy at my investment fund, Greybull Stewardship , is achieving returns on the higher end of the graph without as many potential negative outcomes as in traditional venture capital.  We believe this will be true because of three hypotheses: 1) more firms are making it through the start-up phase to EBITDA of $1-3m while still founder-controlled because today it is possible to build larger businesses with less capital than historically (there is also more education/knowledge about how to build businesses in the world), 2)  a growing sub-set of these businesses do not want to utilize the “invest/buy and flip” model of traditional venture capital or private equity, and 3) our selection criteria at Greybull Stewardship, we believe, helps eliminate some of the downside potential outcomes.

Model for Investment Returns with Greybull Stewardship

Some of our criteria that we believe help eliminate some of those potential downside outcomes while preserving many of the potential upside outcomes are:

  • Invest when the evidence demonstrates a proven model.  Usually, this means waiting until a company has profits and growth.  We are not interested in taking start-up risks like “product market fit” or risk that a technology may or may not work.  There are plenty of founder-controlled companies that make it to this stage.  Then, we are finding a growing sub-set of these firms are no longer interested in the buy and flip model of venture capital or flip equity.
  • Invest only when the management is in place and wants to stay.  We don’t invest when the management is selling out and bailing out — or there isn’t management in place with a track record with the specific business.  We see a higher likelihood that existing management can build on an already good track record and less likelihood that new management could do better. (Yes, this is different than traditional vc’s who believe a founder has a ceiling on his ability to manage the business. And, yes, we have examples in our fund proving management can improve over time.)
  • Don’t change the strategy or impose new constraints on the business.   Greybull’s evergreen fund model gives founders more flexibility than traditional venture capital or private equity models that require certain growth rates, certain exit timeframes, and other constraints — such as never having a flow-through tax entity.  With such constraints, the business ultimately gets twisted around the constraints of the investment firm/fund.  Unique strategies make all the difference in a business — its moat for example. When your investors do not allow you to pursue a unique strategy because of an investor’s constraints, the tail comes before the head.
  • Earn returns from cash flow or exits or both.  I believe it is dangerous for a company, particularly when it’s the largest financial asset of the founder, to aim everything toward an all-or-nothing moon shot exit.  The VC has the portfolio benefit of some home runs balancing out some strike outs, but the founder doesn’t have the benefit of a portfolio and doesn’t want to strike out with his or her main asset.  It is much more sensible in most scenarios to earn financial returns through a combination of current cash distributions and a potential exit.   Greybull’s investment fund is built to allow this, including investing in flow-through entities for tax purposes. (Such flow through tax entities cannot work in most traditional venture capital and private equity funds.)

The traditional venture capital strategy — having every investment strive to be a high risk win because the big winners need to offset some total losses and some middling results — has not been working lately.   VC returns have been low and problematic for over twenty years according to this report from the Kauffman Foundation .  (See their comments on evergreen funding as Greybull uses.)

I believe Greybull Stewardship’s model helps eliminate some downside outcomes while opening more upside outcomes and is a better model for today’s world than the old venture capital models.

3 Responses to "New Twist on Venture Capital with Better Risk-Adjusted Investment Returns"

By myths about timing when raising capital for your business | venture capital october 15, 2013 - 3:01 pm.

[…] Risk-adjusted investment returns […]

By Venture Capital Myths -- Not the Answer for Many Companies - Mason Myers Blog December 2, 2013 - 5:10 pm

[…] New Twist on Venture Capital with Better Risk Adjusted Returns […]

By Great Business Partners Give You Keys to Success - Mason Myers Blog December 15, 2013 - 5:00 am

[…] Avoid risks with better partners […]

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Hedge Fund Business Plan Template

Written by Dave Lavinsky

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Hedge Fund Business Plan

Over the past 20+ years, we have helped over 500 entrepreneurs and business owners create business plans to start and grow their hedge fund companies.

If you’re unfamiliar with creating a hedge fund business plan, you may think creating one will be a time-consuming and frustrating process. For most entrepreneurs it is, but for you, it won’t be since we’re here to help. We have the experience, resources, and knowledge to help you create a great business plan.

In this article, you will learn some background information on why business planning is important. Then, you will learn how to write a hedge fund business plan step-by-step so you can create your plan today.

Download our Ultimate Business Plan Template here >

What Is a Business Plan?

A business plan provides a snapshot of your hedge fund company as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategies for reaching them. It also includes market research to support your plans.

Why You Need a Business Plan

If you’re looking to start a hedge fund company or grow your existing hedge fund company, you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your hedge fund company to improve your chances of success. Your hedge fund business plan is a living document that should be updated annually as your company grows and changes.

Finish Your Business Plan Today!

How to write a business plan for a hedge fund.

If you want to start a hedge fund company or expand your current one, you need a business plan. The guide below details the necessary information for how to write each essential component of your hedge fund business plan.

Executive Summary

Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.

The goal of your executive summary is to quickly engage the reader. Explain to them the kind of hedge fund company you are running and the status. For example, are you a startup, do you have a hedge fund company that you would like to grow, or are you operating an established hedge fund company that you would like to sell?

Next, provide an overview of each of the subsequent sections of your plan.

  • Give a brief overview of the hedge fund industry.
  • Discuss the type of hedge fund company you are operating.
  • Detail your direct competitors. Give an overview of your target customers.
  • Provide a snapshot of your marketing strategy. Identify the key members of your team.
  • Offer an overview of your financial plan.

Company Overview

In your company overview, you will detail the type of hedge fund company you are operating.

For example, you might specialize in one of the following types of hedge funds:

  • Global Macro: This type of hedge fund strategy focuses on global factors and the role they play in financial markets.
  • Event-driven: This type of hedge fund strategy involves pursuing investments associated with a one-time corporate event such as a merger, acquisition, liquidation, or bankruptcy.
  • Relative value: This type of hedge fund strategy centers on market behavior and can include sub strategies such as convertible arbitrage and volatility arbitrage.
  • Directional: This type of hedge fund strategy focuses on using market trend data to select stocks.

In addition to explaining the type of hedge fund company you will operate, the company overview needs to provide background on the business.

Include answers to questions such as:

  • When and why did you start the business?
  • What milestones have you achieved to date? Milestones could include the number of investors contributing to the fund, the number of investments in the fund’s portfolio, or reaching $X amount in revenue, etc.
  • Your legal business Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.

Industry Analysis

In your industry or market analysis, you need to provide an overview of the hedge fund industry.

While this may seem unnecessary, it serves multiple purposes.

First, researching the hedge fund industry educates you. It helps you understand the market in which you are operating.

Secondly, market research can improve your marketing strategy, particularly if your analysis identifies market trends.

The third reason is to prove to readers that you are an expert in your industry. By conducting the research and presenting it in your plan, you achieve just that.

The following questions should be answered in the industry analysis section of your hedge fund business plan:

  • How big is the hedge fund industry (in dollars)?
  • Is the market declining or increasing?
  • Who are the key competitors in the market?
  • Who are the key suppliers in the market?
  • What trends are affecting the industry?
  • What is the industry’s growth forecast over the next 5 – 10 years?
  • What is the relevant market size? That is, how big is the potential target market for your hedge fund company? You can extrapolate such a figure by assessing the size of the market in the entire country and then applying that figure to your local population.

Customer Analysis

The customer analysis section of your hedge fund business plan must detail the customers you serve and/or expect to serve.

The following are examples of customer segments: individuals, families, and corporations.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of hedge fund company you operate. Clearly, individuals would respond to different marketing promotions than corporations, for example.

Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations, and income levels of the potential customers you seek to serve.

Psychographic profiles explain the wants and needs of your target customers. The more you can recognize and define these needs, the better you will do in attracting and retaining your customers.

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Competitive Analysis

Your competitive analysis should identify the indirect and direct competitors your business faces and then focus on the latter.

Direct competitors are other hedge funds.

Indirect competitors are other options that customers have to purchase from that aren’t directly competing with your product or service. This includes other types of financial managers or institutions, and other types of investment opportunities. You need to mention such competition as well.

For each such competitor, provide an overview of their business and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as

  • What types of customers do they serve?
  • What type of hedge fund company are they?
  • What is their pricing (premium, low, etc.)?
  • What are they good at?
  • What are their weaknesses?

With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to ask your competitors’ customers what they like most and least about them.

The final part of your competitive analysis section is to document your areas of competitive advantage. For example:

  • Will you make it easier for investors to work with you?
  • Will you offer investment opportunities that your competition doesn’t?
  • Will you provide better customer service?
  • Will you offer better pricing for your management services?

Think about ways you will outperform your competition and document them in this section of your plan.  

Marketing Plan

Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a hedge fund business plan, your marketing strategy should include the following:

Product : In the product section, you should reiterate the type of hedge fund company that you documented in your company overview. Then, detail the specific products or services you will be offering. For example, will you provide asset management, financial accounting, or liquidity optimization services?

Price : Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your plan, you are presenting the services you offer and their prices.

Promotions : The final part of your hedge fund marketing plan is where you will document how you will drive potential customers to your location(s). The following are some promotional methods you might consider:

  • Advertise in local papers and trade magazines
  • Reach out to websites
  • Engage in email marketing
  • Advertise on social media platforms
  • Improve the SEO (search engine optimization) on your website for targeted keywords

Operations Plan

While the earlier sections of your business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.

Everyday short-term processes include all of the tasks involved in running your hedge fund company, including answering calls, meeting with investors, collecting fees, etc.

Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to acquire your Xth investor, or when you hope to reach $X in revenue. It could also be when you expect to expand your hedge fund company to a new location.  

Management Team

To demonstrate your hedge fund business’ potential to succeed, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.

Ideally, you and/or your team members have direct experience in managing hedge funds. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.

If your team is lacking, consider assembling an advisory board. An advisory board would include 2 to 8 individuals who would act as mentors to your business. They would help answer questions and provide strategic guidance. If needed, look for advisory board members with experience in managing a hedge fund or other financial services business.  

Financial Plan

Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet, and cash flow statements.

Income Statement

An income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenue and then subtracts your costs to show whether you turned a profit or not.

In developing your income statement, you need to devise assumptions. For example, will you charge an asset management fee of 3% and a profit fee of 20% ? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.

Balance Sheets

Balance sheets show your assets and liabilities. While balance sheets can include much information, try to simplify them to the key items you need to know about. For instance, if you spend $50,000 on building out your hedge fund, this will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a lender writes you a check for $50,000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.

Cash Flow Statement

Your cash flow statement will help determine how much money you need to start or grow your business, and ensure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt.

When creating your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a hedge fund:

  • Cost of equipment and office supplies
  • Payroll or salaries paid to staff
  • Business insurance
  • Other start-up expenses (if you’re a new business) like legal expenses, permits, computer software, and equipment

Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your office location lease or your financial management credentials.  

Writing a business plan for your hedge fund company is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will understand the hedge fund industry, your competition, and your customers. You will develop a marketing strategy and will understand what it takes to launch and grow a successful hedge fund company.  

Hedge Fund Business Plan FAQs

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How Do You Start a Hedge Fund Business?

Starting a hedge fund business is easy with these 14 steps:

  • Choose the Name for Your Hedge Fund Business
  • Create Your Hedge Fund Business Plan
  • Choose the Legal Structure for Your Hedge Fund Business
  • Secure Startup Funding for Hedge Fund Business (If Needed)
  • Secure a Location for Your Business
  • Register Your Hedge Fund Business with the IRS
  • Open a Business Bank Account
  • Get a Business Credit Card
  • Get the Required Business Licenses and Permits
  • Get Business Insurance for Your Hedge Fund Business
  • Buy or Lease the Right Hedge Fund Business Equipment
  • Develop Your Hedge Fund Business Marketing Materials
  • Purchase and Setup the Software Needed to Run Your Hedge Fund Business
  • Open for Business

Learn more about   how to start your own hedge fund business .

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How Investment Banks Can Transform Their Business Models - Financial Institutions

Related Expertise: Financial Institutions , Digital, Technology, and Data , Digital Transformation

  • How Investment Banks Can Transform Their Business Models

May 17, 2016  By  Charles Teschner ,  Will Rhode ,  Shubh Saumya ,  Carsten Gubelt ,  Michael Strauß ,  Gwenhaël Le Boulay ,  Laila Worrell ,  Philippe Morel , and  Andre Veissid

Investment banks need to transform themselves to compete in tomorrow’s capital markets industry.

Global Capital Markets 2016

  • The Value Migration
  • How Value Is Shifting in the Capital Markets Ecosystem

The Six Pillars

In our view, six pillars—vision, distribution, client centricity, IT and operational excellence, organizational vitality, and financial and risk control—are critical to building a comprehensive strategy for business model transformation.

Vision.  Banks must identify which parts of the capital markets revenue ecosystem they wish to participate in. They must harness the resources and potential sources of competitive advantage at their disposal, then figure out the most effective charging mechanism to optimize revenues. Leadership and vision can come only from the top, and clarity of purpose will be imperative for transformational success.

Distribution. Explicit charging models for both research and value creation are needed. Banks must also explore dynamic pricing for capital-light agency services versus balance-sheet-intensive principal-based services. Digital functionality will be needed both to improve the customer experience and to invigorate distribution. Areas of primary markets that depend chiefly on human talent—such as high-margin, low-capital-intensive M&A teams—are under less of a threat than more capital-intensive trading businesses.

Moreover, front-office head count, compensation, and technical specialization must all be aligned with client-coverage strategies and product-offering needs. With trading head count representing 30% to 50% of costs (depending on the asset class), aggressive front-office reduction will be required as markets become increasingly electronic. Distribution via electronic channels, which in turn should be consolidated with standardized connectivity, must also be pursued. Moreover, since shifts in trading execution can also impact revenue-model dynamics, serious thought will be required about whether, for certain asset classes, a move toward an agency model—as opposed to an outright exit—would be beneficial. Commitment to a few key asset classes and to building electronic scale through powerful internalization engines will be critical, as will big-data-driven customer analytics in those areas. Broker, clearing, and exchanges costs will need to be tightly controlled in order for an electronic market-making business to succeed.

Client Centricity. An improved understanding of client profitability, share of wallet, and segmentation will significantly help firms understand the balance of trade between themselves and their customers. Banks will have to move away from supplying products to providing services. Only by helping their clients to succeed can they expect to generate revenues.

At the same time, by focusing on how best to serve the client tail and conduct share-of-wallet analyses, firms will be able to ensure that they are being adequately rewarded for the services and resources they provide. Best-in-class banks are already implementing predictive modeling to trigger cross-selling opportunities and developing fully tailored product solutions. Further, to minimize costs, banks have started to simplify their client onboarding processes. Smooth onboarding, amid growing compliance and regulatory requirements, has become an important part of successfully serving clients.

IT and Operational Excellence. Simplifying IT, as well as exploring more advanced financial technology (fintech) alternatives, will enable banks to modernize their operations and reduce costs. This means streamlining legacy systems and eliminating non-value-creating complexity. Focusing on governance, location strategy, and sourcing optimization allows for more rational and efficient architectures. Many banks have complex, highly customized legacy platforms that have evolved to meet changing business requirements. Establishing a target process and technology architecture, as well as a strong governance process to make sure that new development and customization adhere to target architectural standards, can help reduce complexity and the long-term cost of ownership. What’s more, utility models offer the opportunity to share the cost of new development across parties for greater efficiency and return on investment. Some players may opt to leverage a two-speed approach to IT in order to ensure that the digital agenda can still be pursued in an agile fashion alongside IT development programs that require longer lead times. Partnerships with fintech firms can offer significant efficiencies, depending on where institutions are in the process of transforming their technology operations to support the front office. The deeper this process goes, the greater the potential savings. For the moment, the focus of the industry is primarily on data and analytics, as well as on trading software and platforms. (See the exhibit.)

investment fund business model

Within operations, process and organizational simplification will play a key role. Model optimization and redesign, together with a digital process layer, can improve efficiency and accuracy. With regard to structure, several banks have been aligning functions with physical locations and have become increasingly savvy on their sourcing strategies. Shared functions across the entire group are highly correlated with below-average cost per trade. Combined with significant use of utilities, firms can expect to generate IT and operational cost savings of up to 70%—currently equivalent to approximately 17% of total operating costs.

Organizational Vitality. It is also imperative that investment banks reshape their organizations according to their target operating models. Delayering across the entire organization, for example, will ensure shortened hierarchical lines. In the front office, organizational effectiveness requires a lean structure for both producers and nonproducers, as well as across electronic trading and in coverage sales. To ensure that banks attract and retain talent—particularly technology talent—they should continue to align compensation with new roles and responsibilities. A change in behavior and culture is also required. A set of smart rules must be defined and integrated into leadership, engagement, and cooperation models, as well as into rollout plans. These rules can involve training, coaching, incentives, and organizational adjustments.

Financial and Risk Control. Regulatory mandates continue to impact investment banking businesses, making it harder to develop consistent governance. Banks must also explore cost mutualization opportunities—outsourcing duplicated back-office functions that add little value—and accelerate capital mitigation efforts to offset the impact of FRTB. To be sure, investment banks have still not done enough to reduce their capital exposure. They must also achieve efficient allocation of group costs—such as litigation, finance, and cybersecurity—in order to reduce their own overhead. (See the sidebar.)

LITIGATION : A COST OF DOING BUSINESS

Fines and litigation have become persistent and onerous operating costs for banks. Fines related to capital markets activities have generated 38% of total fines over the past eight years—about $108 billion, compared with $176 billion at the group level. It appears that such charges can no longer be viewed as one-off events but must be considered as ongoing, annual costs. (See the exhibit below.)

The good news is that the amount of fines related to US mortgage activity, totaling $51 billion since 2008, has tailed off as the majority of cases have been settled. Nonetheless, a new wave of fines related to market manipulation (for example the FX and LIBOR probes), a total of $26 billion for 2014 and 2015 combined, is now likely as individual prosecutions and bank fines make their way through legal and regulatory systems.

Regulatory fines related to capital markets activity remained significant in 2015, making up 10%, on average, of top-line investment banking revenues for 2014 and 2015 combined. In addition, overall costs for investment banks have risen by 4% since 2010 despite a reduction of $8 billion in operating expenses. Once again, the combination of regulatory capital requirements and a renewed focus on market enforcement—including compliance, tighter oversight of trader behavior, and the like—has mitigated much of the savings achieved by investment banks.

The Journey

Needless to say, transformation does not happen overnight. Banks must decide on their vision and explore initiatives that will result in quick wins to fund the journey. Medium-term success must be realized through a series of transformational steps. A leadership team that personifies the target organization and culture, combined with a sense of urgency, will ultimately enable full-scale transformation and long-term success.

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Partner & Director, Wholesale Banking & Capital Markets

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Managing Director & Senior Partner

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ABOUT BOSTON CONSULTING GROUP

Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact.

Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place.

© Boston Consulting Group 2024. All rights reserved.

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Asset Management Companies Business Model

In the world of financial services, the term Asset Management refers to the investment of securities and cash in a managed way. A wide range of financial products is available for investment purpose under asset management. Asset management is considered as a service that is generally handled by a firm that directs or handles investment portfolio or wealth of clients on their behalf. The clients are mostly high net worth individuals. In other words, Asset management refers to a systematic approach of developing, maintaining, operating, disposing, and upgrading assets in the form of the most cost-effective way.

Asset management companies (AMCs) are investment firms that pool investments or funds from different stakeholder, i.e. institutional and individual investors. These firms further do investment management of these funds by investing in various investment options available such as equities, real estate, stocks, gold, bonds, debt. In professional terms, these companies are known as fund managers as they decide where to invest the pooled money. It is the responsibility of fund managers to identify suitable investment options to meet the investor’s objectives. For this, fund manager of asset management companies performs evaluation task of different aspects like industry risks, market scenario, before deciding upon the right investment options as per investment goals. The ultimate aim of doing such an evaluation is to make investment decisions that are profitable in terms of providing maximum ROI (return on investment) to investors. AMCs are considered as buy-side companies as they support clients in purchasing investments, i.e. which investments to buy.

The evolution of asset management companies is discussed below:

  • The origin of Asset Management companies can be seen at the time of the introduction of first mutual fund in 1924 in the US, i.e. MFS Massachusetts Investors Fund. If we talk about the origin of Mutual fund or Asset management industry in India, then it was initiated in 1963 with the foundation of UTI (Unit Trust of India) which was the initiative of RBI (Reserve Bank of India) and Indian Government as the first mutual fund company in India. In 1987, the emergence of the public sector, Non-UTI mutual funds were held by the LIC (Life Insurance Corporation of India), public sector banks, and GIC (General Insurance Corporation of India).
  • In the 1960s, alternative assets i.e. hedge funds were introduced in the US and it became an asset class by the 1980s. In the Indian context, asset class like hedge funds was introduced as AIFs (Alternative Investment Funds) in 2012.
  • In 1980, the first IPO (initial public offering) was initiated in the US by an asset manager through State Street Corporation. In India, Reliance Nippon Life Asset Management listed for the same in 2017.

The evolution is discussed in the chart below:

Business Model of Asset Management Companies

The business model of Asset Management Companies is described below.

Different elements mentioned in the above business model canvas of Asset management companies are as under:

Value Proposition

  • Risk reduction: Investment management demands risk management and is considered as a crucial element of any type of investment. Asset management companies are able to reduce risk by creating a pool of savings from a lot of investors and supporting individuals to diversify their financials in different assets. Asset managers identify and track risks as per past experiences and by doing so; they can identify and shrink the critical factors that may harm the investment.
  • Professional analysis: Asset management companies provide valuable guidance in making important decisions related to investments. Decisions related to assets of clients are being assessed by professionals carrying a vast experience and knowledge of how the investment market revolves.
  • Outperforming the market possibility:  Asset management companies offer a much better opportunity of outperforming the market, which can result in a higher return than average return. This can be possible by taking more risks and asset managers are efficient at handling those risks.
  •  Protection of Portfolio in the market slow down: Nowadays the market is quite uncertain and insecure. Unexpected changes can be there in politics and environment that lead to uncertainties. Asset management companies provide a way to protect investments in such an uncertain and unstable market environment.
  • Investment expertise services: The manpower of asset management companies is finance professionals carrying extensive knowledge and experience in handling investments and these professionals have specialization in certain asset areas like equities of specific sectors, real-estate, etc.

Customer Segments

Asset management companies mainly serve the following three categories of customers or clients:

1.Retail Investors: These are individual investors who are non-professionals and usually sale and purchase the mutual funds, securities or exchange-traded funds by taking services of Asset management companies. Securities are purchased by retail investors for their own personal accounts and generally, they trade in comparatively fewer amounts as compared to big investors.

2.Institutional Investors: These are big investors or large entities that are indulged in the trading business in the financial markets. Different corporate and other business entities come under this category of clients. Credit unions, mutual funds, insurance companies, investment banks, etc. generally fall under this category of investors. Institutional investors carry a large pool of resources, and they do a lot of financial analysis and research while deciding upon investments. A large pool of assets that are represented by these clients are utilized for pension funds at the corporate level, government pension funds, foundations, etc.

Institutional investors are broadly classified in below 6 types:

  • Pension funds: This investment pool is aimed at paying employees at the time of retirement.
  • Mutual funds: This is an investment tool that includes a portfolio of bonds, stocks, or other securities. There are three ways to earn money from these funds i.e. capital gain due to security sale, dividend payouts, and actual mutual fund sale. The different variety of mutual funds includes bonds in terms of fixed-income, stocks or equity, money market funds, etc.
  • Hedge funds: This includes capital that is pooled from investors for investment purpose. These are financial partnerships carrying the purpose of earning active returns through the investment of their investors by using pooled funds and adopting different strategies.
  • Investment Banks: Different banks such as CitiBank, JP Morgan, Bank of America, etc. fall under the category of Institutional investor clients of Asset management companies. These facilitate capital market access and support corporations with financial decisions of investment.
  • Insurance companies: These invest the premium paid by their clients into more stable sources like bonds. They also invest in the stock market.
  • Endowment funds: Different funds gathered from donations, grants, contributions, etc come in this category and are invested further.

 3.  High-Net-worth Individuals (HNIs): These are the fastest-growing type of clients of AMCs. In India, HNI clients are those individuals who have 2 crores plus investible capital. These clients have assets more than liabilities and of a huge margin.

Key Partners

Asset management companies are in collaboration with different organizations and businesses such as

  • Advisory and supplier partnership: This includes suppliers related to technology, tools, and various other services to assist AMCs in developing and offering their products and services.
  • Strategic and Alliance partnership: This covers various financial service and technology firms as well as other service companies with whom AMCs are in partnership for resource sharing and collaboration on JV (joint venture) projects.
  • Channel partners: This includes various 3 rd parties that are indulged in providing products and services on behalf of Asset management companies.

Key Activities

Below are the various activities an Asset management company performs:

  •   Allocation of asset: AMCs invest the money of clients or distribute assets in equity and debt based on the market conditions and rate of interest. Depending upon the financial goal of the mutual fund, asset manager or fund manager decides for suitable assets for making an investment. For this, knowledge and professional expertise of asset managers play a significant role in resource allocation to various asset segments efficiently.
  • Formulation of the portfolio of investment: One of the key tasks or activities of AMC is to develop or create an investment portfolio. It requires extensive research and analysis of the performance of different asset segments so that a risk-adjusted portfolio can be created. For this, experts review macro and microeconomic aspects, the market, and the performance of funds on a regular basis. They further transfer the relevant reports to the asset managers or fund managers who take decisions for generating good returns on investments.
  • Performance assessment: Asset management companies are answerable to investors and trustees for justifying investment-related decisions. To ensure this, fund performance assessment is done by considering fund returns, asset allocation, etc. AMCs further make this performance review available to all the trustees and investors.

Key Resources

  Asset management companies have different key people who are the main resources that enable the business to manage and act on their client’s behalf. These key individuals include:

  • Financial analysts: These play a significant role within an AMC. The activities of Financial Analysts include conducting research on various investment options and due diligence on futuristic opportunities, identifying the best opportunities to sell and purchase of assets.
  • Economists: These individuals keep track of the current scenario of the market situation, which is an essential activity for AMCs.
  • Asset managers: These people are responsible for final decisions related to asset management based upon the insights from economists and financial analysts. Liasioning with clients and ensuring their best interest come under the portfolio of Asset Managers.
  • Website: All relevant information and important contact details are available on the website of Asset management companies for their clients. One can apply online for their services through the website, even.
  • Mobile app: Asset management companies provide a Mobile app facility to its clients for providing all reports, digital transactions, and host of other related services. The partner portal is also facilitated by AMCs for their partners to support report generation and transactions.
  • Information technology: AMCs use best and advanced IT systems and processes as its resources for customer services, research activities, dealing, risk management, saving time in their operations, and other functions. These companies upgrade their application software and IT infrastructure on periodic intervals.

The channels of AMC are:

  • Brokers: These are the individuals that develop and maintain a relationship with investors through trade execution, providing research, and advice. For this brokers get a commission from the AMCs.
  • Salesforce team: AMCs internal sales team also provides clients the access of AMC’s entire range of mutual funds
  • Websites: Asset management companies are using the internet for maintaining direct contact with their clients via website. Through these websites of investment plans like mutual funds, investors make an investment in direct plans. Websites of AMCs contain all information related to their products and services as well as global operations.
  • Financial Advisors: Different Tax consultants, Chartered accountants are also distribution channels of AMCs.
  • Mobile App: AMCs also offers its products and services through mobile apps that can be easily downloaded on smartphones.

Customer Relationship

The customer relationship of AMC is maintained through:

  • Asset management companies provide different services to their clients through both mobile and online platforms that facilitate customers to access and manage accounts, payment set-up, money movement, etc. Customers can even apply for financial products without direct interaction with the sales staff of AMCs.
  • AMCs also provide personal assistance in the form of technical assistance and ongoing support to their customers through their staff working in various branches. Customers are able to interact with support teams through email or phone. Moreover, Asset management companies also provide different online resources such as news releases, reports of market insights, data visualizations. In order to keep customers informed and up to date with the activities of the market, social media connection is provided via Twitter, LinkedIn, Facebook, Instagram, etc.
  • 24*7 customer support services are available through the use of technology like mobile apps by AMCs. Customers can be connected with these companies through their other ways too, like network branches, call centres, service centres, SMS systems, etc.

Cost Structure

The various expenses incurred by Asset management companies are related to the operation of their branches, Maintenance of communication and IT infrastructure, market schemes implementation, partnership management, salary and benefits cost of staff, payment of professional fee, etc.

Revenue Streams

The revenue model can be described through the chart.

  • Asset management companies generate revenue mainly through annual management fees. Few AMCs earn money through this only. Wherein, some of the AMCs earn money from commissions and transaction fees.
  • AMCs generally take a fee equivalent to a percentage of total AUM (Assets under management) from their customers. AUM is basically the total capital amount that investors provide.
  • Revenue from PMS (Portfolio management services) of AMCs:

PMS is basically an investment portfolio in debt, stocks, and fixed income products which are operated and managed by a professional fund manager to meet specific investment goals. Individual securities are owned by an investor while investing in PMS. A PMS fee charged by AMCs is part of their revenue. Three types of the fee are charged by PMS services i.e.

  • Entry Load:  At the time of purchasing the PMS, AMCs may charge an entry load of 3%.
  • Management Charges : Fund management charges or fee are also collected on each PMS scheme. It may differ from 1%-3% and is charged to the PMS account on a quarterly basis.
  • Profit-Sharing : In addition to a fixed fee, few PMS schemes involve profit-sharing revenue too, in which the AMC provider takes a certain fee amount or profit on the return earned in the fund.
  • Other than the above charges, investors are also charged Custodian fee, Transaction brokerage, Audit charges, and Charges for opening Demat account, etc. by PMS.

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18 Business Model Example Explained

  • July 29, 2020

business model example

Ever wonder how your business will make money? Generating income by selling your products is the basic idea that comes to our mind. While this certainly is one of the types of business models. There are more than 50 different business models.

The blog discusses 18 examples of business models widely used by some top startups giving you an idea about which one and when to opt for.

Most profitable startups never invented new business models. They prefer to borrow it from other organizations & yes it works.

The Razor and Blades model have been highly profitable for Adobe document readers and Verizon’s cell phone business. The cheap-chic business model works for IKEA in the home furnishing business & Trader Joe’s in the grocery business.

Today, the type of business model depends on the usage of technology and innovation. Sometimes, one little twist in a present business model can deliver strong results in a new industry.

So, why do people choose Facebook? It is simply because they can chat and connect with other people around the world (operating model) and do not even charge for it (revenue model).

In this blog, starting with a short description of what exactly is a business model, I will discuss 18 Business Model Examples opted by startups and established firms. I will help you analyze which one works for you.

What is a Business Model?

A business model is a logical structure that supports the feasibility of the business. Designing a business model requires deep thought and analysis.

A business model provides a reason for the customer to choose the offering provided by your company over others. Business models focus on core strategy, customer interface, value network, and resources.

“All it really meant was how you planned to make money” — Michael Lewis

How do you write a business model?

Business Models are created with the help of a business model canvas . In more simple terms, every business model has three parts –

  • designing and manufacturing the product
  • From finding the right customers to selling and distributing the product
  • how the customer will pay and how the company will generate income

As you can see, a successful business model just needs to collect more money from customers than it costs to make the product. You can lower costs during design and manufacturing, finding more effective methods of marketing and sales & figuring out an easy way for customers to pay.

You don’t have to come up with a new business model, you could take an existing business model and offer it to different customers. For example, restaurants mostly work on a standard business model and focus their strategy by targeting different kinds of customers.

Business Model Example

Many people associate business models with lengthy documents but business models do not need to be a long document. A concise, visual document is required to distill the key elements of your strategy and ensure everyone understands the high-level approach. So let’s discuss the various business models with their examples.

1. Subscription Business Model

In the subscription business model, customers pay a fixed amount of money on fixed time intervals to get access to the product or service provided by the company. The major problem is user conversion; how to convert the users into paid users.

When & Why you should opt for the Subscription Business Model.

The subscription model is used because of its pricing structure, in which a business will charge customers a recurring fee to access their product or service.

This model should be used by those companies in which the revenue strategy depends on a customer paying multiple (recurring) and subscription based payments  for prolonged access to a good or service.

So let’s see how this model works for Netflix . Netflix is a subscription service providing online streaming videos that work on a membership-based model. The clients pay every month for access to TV shows, documentaries, motion pictures, and other media content in various qualities.

Subscription Business Model

2. Freemium Business Model 

“Freemium” means “Free” and “Premium” service. It offers two types of services to the customers, ‘free service’ and ‘paid service’. The free service users have limited access to the basic features whereas the premium services are unlocked when the person buys the paid service.

When & Why you should opt for the Freemium Business Model.

The Freemium model should be adopted by companies when they are looking to grow their business and brand quickly. This model is preferred because everybody likes free stuff, and nobody wants to pay money for something they’re not sure will work for them.

So, the freemium model addresses that by providing such an enticing offer: giving users the ability to experience a new product without any risk.

For instance, MailChimp is an email marketing platform that began as a paid service and later added a freemium option in 2009. MailChimp allows the users to collect email list subscribers, create autoresponder series, send regular email updates, and automate their marketing.

Its free plan allows the users to have 2,000 subscribers and 12,000 emails per month, whereas the priced plans give more advanced features. The regular user mostly turns into a paid user as it would be hectic to change the platform once you have 2,000 listed subscribers.

Freemium Business Model 

3. Open Source Business Model

Open source business model provides service/product offered for free, and a business/enterprise version which is paid. In the freemium and business model, the free product is built, developed, and maintained by the company centrally.

In the open-source model, the free product is built, developed, and in part, maintained by an open community of developers. Those developers are a part of an independent community.

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When & Why you should opt for the Open Source Business Model.

Open source business models should be used by a company when they have an aim to create a superior product, which immediately has a competitive advantage, and which generates multiple scalable revenue streams.

The open-source business model relies on shifting the commercial value away from the actual products and generating revenue through ancillary services like systems integration, support, tutorials, and documentation.

Let’s discuss the open-source business model of Fastly.Inc which is an American cloud computing services provider. Fastly leverages an active community of developers and a good chunk of revenue is spent on sales and marketing processes. For a monthly fee, customers get access to the platform & account management with enhanced customer support.

Freemium Business Model 

4. Consulting Business Model

Unlike traditional businesses that have a clearly defined product or tool to sell, a consulting or agency business model provides a specific set of services for a fee. While this business model can be applied to almost any industry, the main drawback of consulting business models is that you should have expertise and authority around your brand.

When & Why you should opt for the Consulting Business Model.

Companies adopt consulting business models as they don’t have either the time or expertise to do specific tasks. This business model should be followed by those companies whose unique value proposition is based on the knowledge and expertise of its people.

For example, Alcor Fund which is a global private equity fund that acts as an advisory with a strong knowledge of the investment market. It offers fund and asset management, merger and acquisition, private equity, and corporate finance.

  It operates through its investment bank & its consulting wing under ALCOR Advisors that advise the clients to take their companies on a rapid growth path through a focused strategy.

  Neil Patel . Neil Patel Digital is the SEO and digital marketing agency that allows Neil Patel to monetize its traffic by offering free basic content marketing tools while charging for the premium.

  The idea was simply that you generate enough qualified leads, set up a team to manage those projects, and grow the agency based on on-coming projects.

Consulting Business Model

5. Distributor Business Model 

A distribution-based business model focuses on a company’s ability to have one or a few key distribution channels to connect to its final user or customer.

When & Why you should opt for the Distributor Business Model.

This model should be adopted when the survival of a company depends on its ability to have one or a few key distribution channels to connect to its final user or customer. In a distribution model, you don’t need to manufacture products of your own, you can comfortably engage in the distribution of the products of a company or several companies at the same time.

Unilever spends its major part of revenue in maintaining a proper distribution. The company is providing a proper distribution network to its brands by working with thousands of retailers and wholesaler suppliers across the world, with a massive supply chain.

Big companies like Unilever having a large turnover, focus on their distribution strategy. They spent most of their resources to tap into channels that can prove to be successful to scale up their business.

Distributor Business Model 

6. Aggregator Business Model 

An aggregator business model involves an aggregator that might act as a middleman. In an aggregator model, it’s the aggregator that keeps interacting with the two or more parties involved.

When & Why you should opt for the Aggregator  Business Model.

Aggregator business model should be followed by a company in which it is not just a mediator but a firm with a brand for providing the goods/services from smaller providers. This model allows a company to connect with different goods/service providers and sell its goods/services under its brand.

For instance, Google shows users a search result page, and the same Google handles the ad inventors. Hence users and advertisers don’t interact with each other to set the price. Google as a search engine is more of an aggregator, where the company centrally enriches its index and builds up its rankings.

Aggregator Business Model 

7. Conceptual Business Model 

A conceptual business model is a diagram that demonstrates to us how an industry or business functions. It shows an essential element in the business and tells how those elements relate to each other.

When & Why you should opt for the Conceptual Business Model.

Businesses should adopt a conceptual business model if their business often requires concepts and ideas to create innovative products. This model defines project scope, establishes entities with concepts, and provides a high level of understanding in different product development cycles.

For example, Maruti Suzuki a car company might create a conceptual model of a new car to be introduced in the market. This model is based on several or a single concept in design.

Conceptual models often require research to generate ideas into more specific concepts. Companies should perform consumer research to get an idea for what appeals most to consumers.

Conceptual Business Model 

8. Razor and Blade Business Model

In the razor and blade model, the basic product (hook) is offered cheaply or free while the complementary product or refill (bait) is sold expensively. We cannot use the basic product without a corresponding product. It is easy to attract customers with the “bait” product because it seems to them like they are getting a bargain. This model is one of the Small business strategy examples.

When & Why you should opt for the Razor and Blade Business Model.

Razor & Blade models are applied by companies when they have a complementary product that encourages repeat purchases. This business model allows the companies to sell their initial product for little to no profit & relying instead on the initial sale to cover their customer acquisition costs.

Companies like Apple use an inverse razor and blade, business model. Apple has created platforms like the iTunes and App Store, which sell songs, apps, movies, or web series at an appropriate price. Apple also charges premium prices on its devices like the iPhone, iPad, and Mac.

Razor and Blade Business Model

9. SaaS Business Model

SaaS or Software as a Service business model is a centrally-hosted software that is hosted on a cloud infrastructure. Customers pay a subscription fee to utilize the software.

Zendesk is a customer service ticketing system famous for its usability by small, medium, and even large businesses. It provides a better customer service experience.

XERO is a huge SaaS model and a popular choice of many accountants to manage their clients.  Auditox Accountancy  uses around 5 different accountancy SaaS programmes but Xero is the one that they say most people feel comfortable with. This is a classic example of something used on mass markets with a high margin of return.

SaaS Business Model

10. Direct Sales Business Model 

When it comes to the small business model, the direct sales business model involves selling a product directly to the targeted customer. chubbies adopted a direct sales model.

Direct Sales Business Model 

11. Advertising Business Model

The advertising model works by providing a free product or service that people want to consume. Later, it displays ads to those readers or viewers. Youtube is following the ad-based business model.

Advertising Business Model

12. Affiliate Marketing Business Model

An affiliate business model allows a firm to sell the products of other companies on their website. Like this company named Khojdeal is selling bluestone products with the help of discount coupons or the famous  Amazon Affiliate Program  follows the affiliate marketing business model.

Affiliate Marketing Business Model

13. Peer to Peer Business Model

A P2P business is a platform between consumers and individual service providers. It provides revenue by taking a percentage of all sales made through their platform.

Airbnb follows a peer to peer business model by charging guests a service fee between 5% and 15% of the reservation, while the commission from hosts is generally 3%.

Peer to Peer Business Model

14. Franchise Business Model

A franchise exists when a parent corporation creates a unique product, a strong brand, and a replicable business model. Later, it sells it to others to own and operate independently. Starbucks is a retail company that sells coffee-related beverages.

Franchise Business Model

15. Amazon Business Model

The Amazon model includes online stores (which account for 52% of Amazon revenues), as well as physical store locations. It also includes AWS services like site hosting, subscription services, third-party sellers, and advertising revenue.

Jeff Bezos famously said “Your margin is my opportunity”

Amazon Model

16. Ecommerce Business Model

The eCommerce model focuses on selling products by creating a web-store on the internet (online shop). Amazon, Alibaba , ebay , olx , and Walmart are some of the big companies that have adopted an e-commerce business model.

Ecommerce Model

17. On-Demand Business Model

The on-demand business model is based on “Access is better than ownership rule”. The products & services are easily accessible to the customer in less time. On-demand laundry & dry cleaning service of uber is evolving & has radically mixed well.

investment fund business model

18. Uber Business Model

Uber runs according to a ‘two-sided’ marketplace business model. The company acts as the middleman or broker between the drivers and those who need a ride. The company earns profits from each transaction, taking a percentage from gross booking.

Uber Model

Before we conclude, I would like to share an important factor to keep in mind that the most successful business models are dynamic and repeatedly evolving. Brands operate with more than one business model. The business model examples can help entrepreneurs find the formula to build a successful company.

Business models are helpful for analysis to understand how businesses work. Though they have found customers, the model fails because of lack of resources. According to Bill Gross, the founder of Idealab, “ timing is the most important factor ”.

The success of a business model depends on the timing, context, and market conditions. Successful and profitable business models generally have substantial brand equity with a strong distribution network.

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Understanding Mutual Funds

Shareholder fees, annual fund operating expenses, no-load funds.

  • Guide to Mutual Funds

How Mutual Fund Companies Make Money

investment fund business model

Most investors have heard of mutual funds , but relatively few understand how these funds really work. This is not surprising; after all, most people are not financial experts, and there are plenty of other things going on in their lives more urgent than the structure of fund companies. But some investors might make better decisions if they understood that mutual fund companies make money by charging them fees, and the size and type of charged fees vary from fund to fund. Mutual funds primarily make money through sales charges that work like commissions and by charging investors a percentage of assets under management (AUM).

The Securities and Exchange Commission (SEC) requires a fund company to disclose shareholder fees and operating expenses in its fund prospectus . Investors can find this information in the fee table situated near the front of the prospectus. Fees are easily the largest source of revenue for basic mutual fund companies, though some companies may make separate investments of their own. Different kinds of fees include purchase fees, sales charges , or the mutual fund load ; deferred sales charges; redemption fees ; account fees; and exchange fees .

Key Takeaways

  • Mutual funds make money by charging investors a percentage of assets under management and may also charge a sales commission (load) upon fund purchase or redemption.
  • Fund fees, called the expense ratio, can range from close to 0% to more than 2% depending on the fund's operating costs and investment style.
  • Fund fees must be disclosed in its prospectus and made transparent to current or potential investors.

Mutual funds are among the most popular and successful investment vehicles, thanks to their combination of flexibility, low cost, and the chance for high returns. Investing in a mutual fund is different than simply packing money into a savings account or a certificate of deposit (CD) at a bank. When you invest in a mutual fund, you are actually buying shares of stock in a company.

The company you are buying is an investment firm. Mutual funds are in the business of investing in securities , much like Ford is in the business of making cars. The assets for a mutual fund are different, but the ultimate goal of each company is to make money for shareholders.

Shareholders make money in one of three ways. The first way is to see a return from the interest and dividend payments off of the fund's underlying holdings. Investors can also make money based on trades made by management; if a mutual fund earns capital gains from a trade, it is legally obligated to pass on the profits to shareholders. This is known as a capital gains distribution . The last way is through standard asset appreciation , which means the value of the mutual fund shares increases.

Fund companies can attach an assortment of fees to their services and products, but where and how those fees are included makes a difference. Sales charge fees, more commonly referred to as loads, are triggered by the purchase of mutual fund shares by an investor. This means the investor pays an additional percentage, something like 5% usually, on top of the actual price of the share. Fund companies do not typically retain the entire sales charges since a large portion often goes to the brokers and advisors who sold the fund.

There are different kinds of fund loads. The most common is the front-end load , which is immediately deducted from the investment amount before the shares are actually purchased. The Financial Industry Regulatory Authority (FINRA) sets an 8.5% cap on front-end loads. For example, a $1,000 investment with a front-end load sends $50 to the broker and $950 to purchase shares of the mutual fund.

There are also back-end loads that can be charged when the shares are sold. The most common of these is called the contingent deferred sales charge (CDSC) . This load starts relatively high and tends to decrease over time, usually dropping to zero after a period of seven to 10 years.

Some fund companies charge purchase fees or redemption fees. These sound a lot like sales charges but are actually paid entirely to the fund, not the broker. Purchase fees take place at the time the shares are bought, and redemption fees take place at the time of shares are sold.

In essence, management fees are highly dependent on the success of the fund and the continued trading of new shares by the public. The most successful funds see a lot of new money and tend to be highly liquid ; more trading equals more fee income for the company.

Mutual fund companies do not operate for free; there are expenses that need to be recouped. These cover costs such as paying the investment advisor , the administrative staff, fund research analysts , distribution fees, and other costs of operation.

Management fees are paid out of the fund's assets rather than charged directly to the shareholders. The SEC requires management fees to be listed as a separate item and not lumped in with the "other" expenses category, so investors can always keep track of which funds are spending the most on management compensation.

Most investors end up hearing about distribution fees, more commonly referred to as 12b-1 fees . Capped at 1% of your fund assets, 12b-1 fees are charged to shareholders to recoup costs associated with marketing the fund and providing shareholder services. A lot of these fund costs are necessary; for example, the SEC requires the printing and distribution of prospectuses to new investors. As the mutual fund space has become more competitive, particularly since the late 1990s, 12b-1 fees have narrowed, and shareholders have become more sensitive to them.

12b-1 fees change from share class to share class. Class A shares tend to impose front-end loads and have lower 12b-1 costs, and some mutual funds reduce the front-end load based on the size of the investment. This is known as " breakpoints " in the industry. The idea is the mutual fund company is willing to sacrifice some revenue on a per-share basis to entice more share purchases. Class B shares and Class C shares tend to have higher annual expenses than Class A shares.

Many mutual funds do not have sales charges; they are called no-load funds . This doesn't mean they are free of fees, however. They may still defray marketing and distribution expenses through 12b-1 fees , though the SEC does not let these companies refer to themselves as no-load if 12b-1 expenses exceed 0.25%. Others, such as the Vanguard family of funds, do not have sales charges or 12b-1 fees at all.

No-load funds can still earn revenue from other kinds of fee income, but these companies also tend to reduce costs to compensate for the lack of sales charge income. This often correlates to less active investment management and a more passive investment strategy for the fund.

U.S. Securities and Exchange Commission. " Investor Bulletin: Mutual Fund Fees and Expenses ," Page 2-3.

U.S. Securities and Exchange Commission. " Investor Bulletin: Mutual Fund Fees and Expenses ," Page 4.

U.S. Securities and Exchange Commission. " Investor Bulletin: Mutual Fund Fees and Expenses ," Page 6-7.

U.S. Securities and Exchange Commission. " Distribution [and/or Service] (12b-1) Fees ."

U.S. Securities and Exchange Commission. " Final Rule: Delivery of Disclosure Documents to Households ."

U.S. Securities and Exchange Commission. " Investor Bulletin: Mutual Fund Fees and Expenses ," Page 7.

Vanguard. " Vanguard Mutual Fund Fees & Minimums ."

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CONTACT   Christopher Gil   Director of Strategic Communications and Influence    (415) 287-3197, [email protected]   

FOR IMMEDIATE RELEASE     

Low Income Investment Fund Announces Release of Its 2023 Annual Impact Report, Highlights Banner Lending Year and Development of Comprehensive Early Care and Education Busines s Model  FY23 sets the table for FY24’s anticipated capital-deployment successes and further scaling   

SAN FRANCISCO (Feb. 21, 2024) — The Low Income Investment Fund (LIIF) has announced the release of its 2023 Annual Impact Report , displaying continued racial equity in lending and a banner year as a renowned community development financial institution (CDFI). The digital report, with a theme of “Scaling Up,” blends compelling elements of narrative, data, imagery, video and animation to tell a story of measurable impact. Detailed is LIIF’s exponential growth, plus how the CDFI is a fiscally sound organization with continued strong S&P and Aeris ratings. This pair of rating agencies indicated that the organization is uniquely positioned to drive investments into historically excluded communities in the face of any national economic uncertainties. 

“As we set the stage for LIIF in the next decade, we are excited about the possibilities before us,” said Chief Executive Officer Daniel A. Nissenbaum at LIIF and LIIF Board Chair Reymundo Oca ñ as. “We are determined to continue pushing the boundaries, thinking differently about the risks we are willing to take, and driving toward a future where everyone in the United States can live in a community of opportunity, equity and well-being.”    Highlights of the FY23 July 1, 2022-June 30, 2023 timeline include: 

  • A banner year of $292 million in loans closed – boosted by almost 100% from FY22. 
  • Being ahead of schedule by already hitting 43% of the goal of driving $5 billion in investments to advance racial equity (2020-2030). 
  • Having now deployed over $147 million in grant funding to 1,800 home-based and center-based child care providers, alongside 6,500 hours of technical assistance and training.    
  • Staff growth to 150+. 
  • Strengthened existing partnerships and the forging of new ones. 
  • Policy work around matters of importance to the CDFI sector. 

A major example of LIIF’s scaling up is its new, comprehensive early care and education ( ECE ) business model. While LIIF has been working in the child care sector for 25 years, that focus reported unprecedented growth during the pandemic via a partnership with the California Department of Social Services and its $350.5 million Infrastructure Grant Program (IGP). LIIF has been serving as facilities fund manager for this initiative, with capacity building and advisory services now rounding out LIIF’s three ECE business verticals for its national strategy for supporting the child care sector. 

Also central to the report is the showcasing of LIIF’s movement toward deeper racial equity in lending, with an Impact-Risk-Profitability ( IRP ) Framework created with dimensions of impacts for the scoring of prospective loans.    “I encourage other CDFIs to join this movement of scaling up racial equity in lending,” said President Kimberly Latimer-Nelligan at LIIF. “Together, we are bettering communities, one loan and one developer at a time.” 

Read the full LIIF 2023 Annual Impact Report report here . 

About the Low Income Investment Fund    Low Income Investment Fund (LIIF) is a national community development financial institution (CDFI), headquartered in San Francisco with offices in New York City, Atlanta, Los Angeles and Washington, D.C., that invests in communities of opportunity, equity and well-being. As a CDFI, LIIF supports projects that have high social value but lack access to traditional financial institutions. Since 1984, LIIF has deployed more than $3.5 billion to serve 2.5 million people in communities across the country from its five offices. An S&P-rated organization, LIIF funds healthy communities by providing innovative capital solutions.    liifund.org  

As we set the stage for LIIF in the next decade, we are excited about the possibilities before us. LIIF Chief Executive Officer Daniel A. Nissenbaum and Board Chair Reymundo Ocañas
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SIDBI, Bihar Start-up Fund Trust Ink Pact For Enhancing Startup Ecosystem in Bihar The fund shall not invest directly into start- up companies, instead it shall contribute to the corpus of SEBI registered Alternative Investment Funds, which in turn shall invest in startups.

By Entrepreneur Staff • Feb 24, 2024

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With an aim to transform Bihar into a startup hub, Small Industries Development Bank of India (SIDBI) and Bihar Startup Fund Trust have collaborated to administer the INR 50 crore Bihar Startup Scale-up Financing Fund (BSSFF). The fund, to be managed by SIDBI, shall be in the form of a Fund of Funds. In this model, the fund shall not invest directly into start- up companies, instead it shall contribute to the corpus of SEBI registered Alternative Investment Funds, which in turn shall invest in startups.

Department of Industries, Government of Bihar, Shri Pankaj Dixit, IAS, Director Industries and Shri Arijit Dutt, General Manager, representing SIDBI formally signed the agreement.

Bihar Start-Up Fund Trust ("BSFT") is a nodal agency constituted by Department of Industries, Government of Bihar for implementation of Bihar Start-Up Policy of the Government of Bihar. The Policy aims to foster entrepreneurship and promote innovation by creating an ecosystem that is conducive for the growth of start-ups in the state. Under the Policy, the Government of Bihar has set-up Bihar Start-Up Fund Trust with an initial Corpus of INR 500 Crores. Out of this fund, Bihar Startup Scale-up Financing Fund (BSSFF) has been established with an initial corpus of `50 Crores for scale-up funding support to startups.

Since, its formation in 1990, when the risk capital and VC ecosystem for innovative enterprises and startups was nearly non-existent in the country, SIDBI has been impacting the lives of citizens across various strata of the society through its integrated, innovative, and inclusive approach.

Over the last 3 decades, SIDBI has taken several pioneering steps to support building up of startup ecosystem including support out of its own balance sheet. SIDBI supported setting up of several schemes on its own before emerging as a key partner of the Government of India and several State Governments for managing their vision in Startup space through Fund of Funds interventions. Apart from FFS, it also manages ASPIRE Fund of Funds of Ministry of MSME with focus on Agro and Rural enterprises, and state focussed Fund of Funds for Uttar Pradesh & Odisha and now Bihar.

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