What Do You Need to Start an Investment Fund?

Wondering how to form an investment fund? Starting an investment fund gives individuals and families more control over managing their money. Are you drawn to stocks, real estate, or private equity? Starting a fund requires careful planning. You’ll need a clear strategy and be able to raise capital. Below, we’ll walk you through the key steps, from shaping your investment approach to connecting with potential investors. 

8 Steps to Kick Off Your Investment Strategy

If you’re asking yourself, “How do I start an investment fund?” you’re in the right place. Starting a fund takes more than a good idea. It requires planning, structure, and long-term vision. Below are eight steps to turn your investment plan into a working fund. 

Step 1: Define Your Investment Strategy

Your strategy shapes how the fund works and what it’s designed to achieve. It gives potential investors a transparent picture of your focus and goals. 

Some funds focus on public markets, such as stocks or bonds. Others invest in private equity, real estate, or alternative assets like farmland or collectibles. You can cast a wide net or keep it narrow. A focused niche, like a specific industry or investment style, sets you apart in a crowded market. 

Strategic investment management typically comes down to choosing where you want to play and why. If you’re pursuing active management, you’ll need a strong case. According to Visual Capitalist, 95% of large-cap actively managed funds underperformed their benchmark over a 20-year period. A clear, unique strategy makes you stand out. 

Step 2: Create a Comprehensive Business Plan

A business plan gives your idea structure and direction. It’s a way to organize your thinking and present a convincing case to investors. 

Begin with an executive summary and your investment thesis. Then, outline your target market, competition, structure, and financial goals. Include projections and explain how you plan to grow. Your plan doesn’t need to be flashy. It needs to be thorough and grounded. 

A solid plan is useful internally and establishes credibility with potential investors. You want to show that your goals reflect long-term thinking. If your fund is tied to your personalized financial planning, your plan can demonstrate how the two connect. 

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Step 3: Invest Personal Capital and Build a Pitchbook

Putting your own money into the fund shows your commitment. Investors want to know that you’re personally invested in the outcomes, literally. 

Once you’ve contributed personal capital, you’ll also need a pitchbook. This document explains who you are, your strategy, what kind of returns you’re aiming for, and why your approach stands out. A strong pitchbook gives potential investors a clear view of what they’re stepping into.

Being upfront and transparent in your pitch materials is imperative. What you’re offering matters, but how you present it is equally important. 

Step 4: Navigate Legal and Regulatory Requirements

Selecting a fund structure is one of the most important early decisions. You might set up a hedge fund, private equity fund, or another type of private fund. Each structure comes with specific legal and tax rules. 

You’ll also need to decide if you want to register with the SEC or claim an exemption under Regulation D. This usually depends on your investor base and fund size. Many funds aim to work with accredited investors, which impacts how they’re set up and what’s required.

Legal fees and administrative costs add up fast. According to Hedge Fund Alpha, initial costs to start a hedge fund range from $200,000 to $1 million, with annual expenses between $150,000 and $500,000.

You’ll need a law firm that understands fund formation. Hiring experienced legal counsel upfront can save you time and reduce complications down the line.

Step 5: Build a Strong and Experienced Team

Even if you’re the driving force behind the fund, you’ll need others to contribute so you can succeed. Building a strong team brings both credibility and competency to your fund.

Some of the most common roles include a Chief Investment Officer (CIO), Chief Financial Officer (CFO), and Chief Operating Officer (COO). You might also want analysts to research investments and legal aid to handle compliance and contracts. 

Your team doesn’t need to be large from the outset. However, it should reflect the size and scope of your fund. Some roles can be filled by outside partners or service providers, especially early on. The key is having the best people to handle investment decisions, fund administration, and investor communication. 

Step 6: Raise Capital from High-Net-Worth Investors

Once your strategy, structure, and team are in place, it’s time to raise money.

Start with your own network, people who know you and believe in your approach. From there, expand to family offices, industry contacts, and referrals. Attending investor conferences and sharing your perspective through articles or podcasts also widens your reach.

Investors need more than projected returns. They want to know who’s managing their money and why your fund is a good fit for their goals. Credibility matters. So does trust. Being transparent and consistent in sharing information can go a long way. 

Fundraising also happens at scale. According to Private Equity International, the PEI 300, the world’s largest 300 private equity firms, raised a combined $3.29 trillion between 2020 and 2025. To break into the top 100, firms need to raise at least $7.6 billion. While you don’t need those numbers to start, they show how much capital is flowing into the space and how competitive it can be. 

Step 7: Prioritize Exceptional Investor Experience

Performance matters, but investors often remember how they were treated just as much as how their money performed. 

Offering a strong experience means regular, honest updates. Investors appreciate transparent reporting and personal outreach. Some funds go further with private events, strategy calls, or customized dashboards. 

A good experience strengthens loyalty and leads to more referrals. When investors are seen and informed, they’re more likely to stick around and recommend your funds to others. 

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Step 8: Continuously Adapt to Market Trends

Markets change. Your fund should, too.

This doesn’t mean overhauling your strategy each year, but being open to new ideas. That could include adjusting your investment thesis, exploring new asset classes, or adopting new technology.

Interest in ESG (environmental, social, and governance) investing continues to increase. There is also a demand for exposure to digital assets or alternative investments. You may find new opportunities by reviewing your fund’s performance in the context of where the market is headed.

As of 2024, passively managed funds like ETFs and index funds hold more U.S. assets than active funds. Passive strategies have brought in more inflows for eleven years straight. Tracking these trends lets you stay relevant and spot new ways to grow. 

Building a Successful Investment Fund

Starting a fund takes time, planning, and a clear point of view. You want to offer something thoughtful and well-structured. Are you just beginning or already laying the groundwork? Keeping the focus on long-term goals and steady execution is essential. 

Key Takeaways:

• Your investment strategy is the foundation of the fund. Make it clear and differentiated.
• A well-written business plan guides your decisions and attracts investors.
• Personal capital and a strong pitchbook show commitment and establish trust.
• Legal structure and compliance need careful attention from the start. 
• Investor relationships are built on clarity, communication, and ongoing service.

Action Items:

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Find an advisor to lock in your investment planning today! A trusted partner can refine your strategy, structure your fund, and start raising capital with confidence. 

FAQs

How do fund owners make money?

Fund owners typically earn management fees, performance fees (a percentage of profits), or both, depending on the fund's structure.

Do you need a license to start an investment company?

Yes. Most fund managers must register with the SEC or state regulators. They may need additional licenses if they manage specific types of securities or investors.

How much capital do you need to start an investment fund?

It varies widely—some private funds launch with a few hundred thousand dollars. In contrast, hedge funds often need several million to cover setup costs, legal fees, and operations.

What percentage of hedge funds fail?

Roughly one in three hedge funds closes within the first three years, often due to underperformance or difficulty raising enough capital.

Who owns an investment fund?

The investors own the fund’s assets, but the fund manager or management company controls day-to-day decisions and operations.

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