The Key Role Early-Stage Planning Plays in Fund Management

The Key Role Early-Stage Planning Plays in Fund Management

April 8, 2024·LEIpapa
There are several factors that the fundraising team should consider and address during its initial planning. That also includes compliance with regulations and LEI obtaining requirements.
The Key Role Early-Stage Planning Plays in Fund Management

The problem explanation

Effective early-phase design and planning are crucial for the success of an investment fund. The structural elements of the investment fund must match the intended investment strategy specified in the fund’s prospectus. Planning and regulatory compliance also help to focus the fundraising team so that effort and cost are not expended inappropriately.

Planning during the early-stage will normally outline all of the fundraising team’s activities up to the first closing of the fund and the key business milestones and regulatory approvals required.

Definitions used in this article

Who are GPs and LPs?

The investors are the limited partners and are referred herein to as the LPs, and the investment manager is the general partner and is referred herein to as the GP.

Who are the fundraising team?

The fundraising team is referred herein to as the group of professionals employed directly by the GP (or its affiliates) and specifically involved in the fundraising process for the GP. The fundraising team may be assisted by outside (3rd party) professionals, including legal advisers, placement advisers, and other specialists. The effective integration and coordination of these advisers is an important part of a successful fundraising process.

The issues that the fundraising team should consider during its early-stage planning

There are several factors that the fundraising team should consider and address during its initial planning. Doing so will help to ensure that the GP will be able to keep its promises to investors and operate the fund with due skill, care, and diligence.

A well-structured investment fund, with an adequate level of financial and operational resources, will be better placed to satisfy the needs of LPs and create a strong foundation for the operation and management of the fund after closing.
  • Fundraising timing including reviewing any restrictions from existing funds or contracts on raising new money, and the availability of the GP’s human and financial resources to market and raise the fund;
  • Fundraising budget and costs including consideration of the costs of the fundraising such as legal and regulatory charges, travel and placement adviser costs, and the apportionment of these costs between the fund and the GP;
  • Investment strategy, including the fund’s investment policy and objectives as well as any specific requirements coming from that strategy such as fund size or geographic scope.
  • Resources for implementing the strategy, including identifying the human resources that will be needed to implement the fund’s objectives and responsibly manage and administer the fund and the GP’s activities while ensuring such individuals are likely to remain committed to the fund for its duration.
  • Fund structure, including form and jurisdiction as well as key structural terms such as the length of the investment period and term of the fund, minimum and maximum fund sizes, and deal flow allocation between other funds managed by the GP.
  • Fund economics including the level of management fees, the provisions regarding the transaction, advisory or other costs to be incurred by the fund or the GP, and the appropriate profit share and carried interest structure, in particular focusing on the apportionment of carried interest, timing of payments and GP clawback mechanisms.
  • Marketing strategy, including what type of LPs will be targeted for the fund and the resulting regulatory requirements for marketing, the structural impact on the fund, and other specific requirements of the targeted group (such as environmental, social, and governance (“ESG”) or other reporting needs).
  • Responsible investment considerations including their incorporation into the GP’s organisation and its investment and portfolio monitoring processes and policies.
Important! Responsibility of the fund manager for ensuring compliance with applicable anti-money laundering requirements. Read more…

Fund legal requirements and LEI

One of the impacts of the AIFMD is more specific registration and marketing requirements for affected funds and managers. It is important to note that, in some jurisdictions, the GP and/or fund need to be legally established as a prerequisite for starting the registration and authorization process by the regulatory authorities and hence the marketing of the fund.

It is the responsibility of the GP to make sure that the fundraising team complies with the applicable regulations for marketing the fund, and should seek appropriate assurances from third parties (particularly placement advisers) that they will comply with all applicable fund marketing regulations.

From January 3rd, 2018 all legal entities (regardless of where the legal entity is incorporated, or geographically located), investment funds, and structures involved in buying, selling, or issuing financial instruments on EU-regulated markets are responsible and required to obtain and maintain a Legal Entity Identifier (LEI).

LEI number is required by any legal entity whose activities incorporate financial transactions.

How an LEI can help Fund Managers?

The Legal Entity Identifier LEI is a globally recognized alphanumeric code designed to improve financial system transparency and risk management. It plays a crucial role in identifying legal entities involved in financial transactions and, indirectly, in revealing beneficial ownership.

LEIs contribute to financial transparency, helping regulators and organizations gain insights into beneficial ownership structures and detect potential financial misconduct.

Comprehensive due diligence and compliance efforts may involve additional sources of information, such as corporate registers, beneficial ownership registers, and customer-provided documentation. That’s why, at LEIpapa we are building the biggest and the most relevant registry containing all the data necessary for the development of business transactions between financial market participants and other legal entities.


Who needs an LEI?

In general, an LEI number is required by any legal entity whose activities incorporate financial transactions. All legal entities, other than natural persons are eligible for the LEI number obtaining.
More info…

Who can apply for an LEI?

As defined in ISO standard 17442, any legal entity that enters into a financial transaction is eligible for an LEI.
More info…

Who may NOT apply for an LEI?

An LEI may not be requested by any of the following:

  • Individuals;
  • Unregistered businesses and entities;
  • Operating divisions;
  • Branch offices within the same country as a head office with an existing registered LEI.
    More info…

How to search LEI codes?

LEIpapa has developed a free LEI Search application, so users can search within the whole LEI database.
More info…

Is the LEI data publicly available?

Yes. The Global Legal Entity Identifier Foundation (GLEIF) has published the Global LEI Index. It provides information, updated daily, on all LEIs issued to date. Any interested party can easily access and search the complete LEI data pool free of charge using LEIpapa LEI Lookup application or on the GLEIF website.

Will an LEI be the same for all classes of assets (bonds, mortgages, etc.)?

Yes. The LEI is a unique identifier for any given legal entity. It is not an identifier for instruments. As a result, that legal entity will use its LEI for reporting of any type of financial transaction it enters into regardless of the asset class or when the particular asset was issued.

LEIpapa: Your Trusted Partner in LEI Registration

Why Choose LEIpapa for LEI registration?

Expert Guidance: Our team of seasoned professionals is here to guide you every step of the way, ensuring that your LEI registration is done right the first time.

Swift and Simple Process: We’ve streamlined our procedures to provide you with a quick and straightforward registration experience.

Global Compliance: With LEIpapa, you can be confident that your LEI registration adheres to all global regulatory requirements, keeping you compliant and secure.

How to Register an LEI with LEIpapa?

Easy Online Application: Start your LEI registration journey by filling out our simple online application. It’s fast, user-friendly, and can be completed in just a few minutes.

Support at Every Step: Our dedicated customer support team is always on hand to assist you with any queries or guidance you may need throughout the process.

Does LEIpapa have a community?

Yes, we have an amazing community of professionals. Once registered, you’ll be part of our growing community of satisfied clients who enjoy timely updates and insights about LEI and global financial trends. For you it is an amazing step to build connections and leverage the power of a valid LEI to connect and engage with businesses and entities worldwide, enhancing your global presence and opportunities.

At LEIpapa, we understand the importance of a Legal Entity Identifier (LEI) in today’s interconnected global economy, and we’re committed to making your registration process as smooth and hassle-free as possible. Visit LEIpapa web app or contact us to start your LEI registration today.

Feature photo by August de Richelieu.

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LEIpapa is an Official LEI Registration Agent and a partner of Ubisecure RapidLEI. We build the most reliable and transparent corporate data registry on Global LEI system.

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