After early operations are in order, establish the fund’s legal structure.
In the United States, a fund typically assumes the structure of a limited partnership or a limited liability firm.
First, outline your business strategy and differentiate your financial plan from those of competitors and benchmarks.
Establishing a business strategy requires significant research into a defined market or individual sector.
As a founder of the fund, you will be a general partner, meaning that you will have the right to decide the investments that compose the fund.
Your investors will be limited partners who don't have the right to decide which companies are part of your fund.Private equity firms have been a historically successful asset class and the field continues to grow as more would-be portfolio managers join the industry.Many investment bankers have made the switch from public to private equity because the latter has significantly outperformed the Standard & Poor's 500 over the last few decades, fueling greater demand for private equity funds from institutional and individual accredited investors.Some funds focus on energy development, while others may focus on early-stage biotech companies.Ultimately, investors want to know more about your fund's goals.Meanwhile, there are several business focuses you could adopt.Will your fund aim to improve your portfolio companies' operational or strategic focus, or will this center entirely on cleaning up their balance sheets?It's also wise to establish an advisory board and explore disaster recovery strategies in case of cyber attacks, steep market downturns, or other portfolio-related threats to the individual fund.Another important step is to establish the firm and fund name.The second step is to write a business plan, which calculates cash flow expectations, establishes your private equity fund's timeline, including the period to raise capital and exit from portfolio investments.Each fund typically has a life of 10 years, although ultimately timelines are up to the manager's discretion.