Building Legal Infrastructure for Multi-Fund Strategies
As fund managers grow and evolve, many expand from a single fund into a multi-fund platform. Whether it’s launching follow-on funds, sector-specific vehicles, or co-investment opportunities, managing multiple funds requires more than just ambition—it demands a solid legal foundation.
This article outlines the core legal considerations fund managers should keep in mind when building infrastructure to support multi-fund strategies.
1. Fund Entity Structuring
Each fund in a multi-fund platform is typically formed as a separate legal entity—often as a Limited Partnership (LP) or Limited Liability Company (LLC). Managers must decide whether to centralize certain functions or maintain complete separation across funds. Jurisdiction, tax efficiency, and investor preference all play a role in structuring decisions.
2. Investment Adviser Registration and Compliance
A single advisory firm may manage multiple funds, but regulatory requirements often change with scale. Fund managers should ensure their investment adviser registration (with the SEC or state regulators) covers all their activities. Additional compliance obligations—such as Form ADV updates—are critical in a multi-fund context.
3. Inter-Fund Conflicts and Allocation Policies
Operating multiple funds introduces the potential for conflicts—especially around deal allocation. Managers must adopt and document clear allocation policies that are fair, transparent, and defensible. LPs want assurance that no fund is being favored at the expense of another.
4. Centralized vs. Decentralized Operations
Multi-fund platforms must decide whether to centralize operations (e.g., finance, legal, compliance) or establish separate admin teams per fund. Centralization can improve efficiency but must be supported by clear service agreements and cost allocation methods that satisfy LP expectations and avoid co-mingling risks.
5. Governance Frameworks
Each fund may have its own advisory committee, reporting requirements, and governance protocols. Fund managers should establish consistent frameworks for decision-making, disclosures, and investor engagement across all funds to minimize confusion and streamline operations.
6. Cross-Fund Investments and Co-Investments
Multi-fund platforms often engage in co-investments or allow one fund to invest in another’s deals. These strategies require careful legal structuring to avoid self-dealing issues, maintain fair valuation practices, and uphold fiduciary duties across the board.
7. Fee and Carry Structures
While it’s common to maintain a “2 and 20” model, multi-fund managers may adjust fees and carried interest based on fund size, strategy, or investor base. Legal counsel should help design consistent yet flexible fee structures that comply with partnership agreements and investor side letters.
8. Side Letters and MFN Clauses
With more funds come more investors—and with them, more side letters. A robust tracking and compliance system is essential to monitor Most Favored Nation (MFN) provisions and ensure that obligations in one fund don’t inadvertently create liabilities in another.
9. Branding, IP, and Reputation Risk
As you scale, your firm’s brand becomes a legal asset. Protect trademarks, IP rights, and digital content to ensure consistency across funds and marketing materials. And remember: reputational damage in one fund can affect the entire platform.
10. Technology and Fund Infrastructure
Modern fund managers leverage fund administration software, CRM platforms, and data rooms that scale across multiple funds. Legal infrastructure should support these tools—ensuring secure LP onboarding, reporting, compliance tracking, and audit readiness.
Scaling Smart, Structuring Right
Running multiple funds is a major milestone—and a serious operational challenge. By proactively building a legal infrastructure that supports growth, fund managers can minimize risks, optimize performance, and maintain investor confidence at scale.
For tailored legal strategies to support your evolving fund platform, contact our Miami-based team at 786.461.1617. We help fund managers scale with legal clarity and operational confidence.