I have been thinking for a while about managing investments on behalf of family and friends to increase the funds I have available to play with to fulfil all the investment ideas I have. I would like to charge a management fee modelled on that used by Warren Buffett in his early days. Something along the lines of taking a proportion of investment income above a certain benchmark (such as the long-term government bond rate), which would remain invested alongside investor's capital. To stop me making silly investments and put my investors at ease, I would also offer a personal guarantee to reimburse losses up to this benchmark rate. I know it sounds a lot like the way the scrapped resources super profits tax worked, but I got the ideas from the biography on Buffett entitled "Snowball". I think the model does a much better and fairer job of aligning the incentives of the fund manager to the interests of investors. I find it a bit rich when large fund managers take their 2% fee even as their funds halve in value (and sometimes take a performance fee on top for not losing as much as the index!!
).
Such a fund could be used for property investments, but I would probably focus more on listed equities. Anyway, I find the Corporations Act more than a little light reading so I was hoping people here could point me in the right direction for the best way to set up such a fund without needing to go through such a load of red tape to make it not worthwhile. For example, I would like to avoid the need to obtain an AFS licence (at least until I have many millions under management). The exemptions for small-scale offerings that have less than 20 investors and raise less than $2m per 12 month period look promising. I wouldn't be advertising it publicly. Has anyone had any experience setting up something like this and are there any tricks to watch out for?
What would be the best structure for such a fund? I imagine a unit trust would be the easiest to manage.
For more on the topic, and which prompted me to post after having it rolling around in my head for so long, see the July issue of API and the accompanying web special on DIY property syndicates (http://www.apimagazine.com.au/api-online/web-specials/2010/07/diy-syndicates). Are there any legal differences (apart from stamp duty liability) between syndicates investing in property or shares?
).Such a fund could be used for property investments, but I would probably focus more on listed equities. Anyway, I find the Corporations Act more than a little light reading so I was hoping people here could point me in the right direction for the best way to set up such a fund without needing to go through such a load of red tape to make it not worthwhile. For example, I would like to avoid the need to obtain an AFS licence (at least until I have many millions under management
). The exemptions for small-scale offerings that have less than 20 investors and raise less than $2m per 12 month period look promising. I wouldn't be advertising it publicly. Has anyone had any experience setting up something like this and are there any tricks to watch out for?What would be the best structure for such a fund? I imagine a unit trust would be the easiest to manage.
For more on the topic, and which prompted me to post after having it rolling around in my head for so long, see the July issue of API and the accompanying web special on DIY property syndicates (http://www.apimagazine.com.au/api-online/web-specials/2010/07/diy-syndicates). Are there any legal differences (apart from stamp duty liability) between syndicates investing in property or shares?
