All About The Fund Incubator
The Fund Incubator Limited provides services to fund managers who are either in the start-up phase and are not yet regulated or where they need to be structured as advisers to a regulated management company.
The company was originally set up in 2001 to help exploit investment ideas generated by leading Scottish Universities and was named Caledonia Capital Managers Limited. In 2011 it took on its first regulatory umbrella mandate – the £37m Passion Capital fund and has thrived since. It has now helped and mentored numerous funds and fund managers to navigate the fund raising, fund management and regulatory processes.
In 2016 Caledonia was the subject of an MBO led by Stephen Geddes and Barry Lawson, two highly experienced private equity professionals who had worked closely with Caledonia for many years and developed a deep understanding of the business and the opportunity that a flexible, responsive regulatory umbrella could create.
The Fund Incubators regulatory umbrella provides the following services:
Start Up Fund Managers
The Fund Incubator helps resolve problems faced by first time fund managers created by the very substantial time that it takes the FCA to deal with applications. Telling institutions who are ready to commit to your fund and invest that they have to wait for another 6 + months is likely to be a deal breaker.
Using our regulatory umbrella your fund can start investing and charging management fees in as little as 3 weeks. The FCA recently wrote to applicants saying that they wouldn't even get round to allocating new applications to a case officer for four and a half months after they received it! Once you become authorised we will resign.
On-going Management Services
When a fund is being organised but the promoter group isn't regulated and does not wish to be then the Fund Incubator is able to step in and act as a permanent fund manager. The promoter group provides insight and advice to the Fund Incubator to assist with the selection and review of investments.
The Fund Incubator helps develop the experience and systems of new fund managers so that they are able to make more credible FCA applications and demonstrate to fund investors that they have a sophisticated approach to operating the fund.
How the Umbrella Works
Using the regulatory umbrella is very simple. Once your investment team has formed a new fund then The Fund Incubator Limited is appointed under an Interim Management Agreement to act as the fund manager. Members of the Investment Team would usually join the investment committee of their fund.
Set out below are some further insights into how the umbrella works in practice.
Marketing the Fund
- Marketing the fund – if you wish us to The Fund Incubator can oversee the marketing of the fund - reviewing, approving and issuing information memorandum and fund marketing documents;
- Investor Due Diligence Questionnaires – investors will want to undertake due diligence and, where asked we will assist in the preparation of Investor DDQ’s when asked.
Managing the Fund
As the interim fund manager we will need to build with you a proper investment process:
|1.||Work in Progress - we will agree with you regular 'Work in Progress' meetings so that we stay up to date with your plans;|
|2.||Investment Decisions - we will establish a dedicated investment committee for your fund. The Committee will be chaired by one of our Managing Partners and can, if you wish, contain one or more of your nominees. Such nominees will need to be approved by the FCA;|
|3.||Due diligence and deal sourcing When investors chose to back a team they are backing its judgement, its track record and its ability to source, assess and create great investment opportunities. The investment team therefore uses its contacts to source deals, undertakes relevant due diligence and writes the necessary investment papers;|
|4.||KYC Checks – there is a legal obligation to undertake ‘Know your Customer’ checks before any investment is made (or sold);|
|5.||Drawdown notices The Fund Incubator – or your fund administrator if there is one – will send out draw down notices to investors to ensure that there are adequate funds to complete a deal;|
|6.||Custody Share, loan note certificate etc will be registered in the name of your fund and held either by the fund or by its fund administrator if one has been appointed;|
|7.||Managing the Investment -Your investors are backing your skills at managing the investment post completion not ours. If the investment agreement includes rights to appoint a director we would expect to appoint one of the promoter’s team, if it includes the right to visit premises or hold meetings with a portfolio company management team we would expect that you attend them. In both cases however we would expect that you keep proper notes;|
|8.||Exiting the investment – if a purchase does emerge whilst we are still the interim manager then we would expect that the investment team would evaluate any offer and prepare an investment paper recommending acceptance or rejection of the offer.|
For Start Up Fund Managers once you become FCA authorised we resign and you become the manager of your own fund. Where required the Fund Incubator can remain involved indefinitely.