Setting up a wholesale fund in Australia can be a complex process, but with the right guidance and planning from King Irving, it is possible to establish a stress-free investment vehicle that is right for you and your fund. In this article, we will discuss the steps involved in setting up a wholesale fund, including the legal and regulatory requirements, the type of assets that can be included in a fund, and the ongoing management and administration of a fund.
Step 1: Understand the legal and regulatory requirements
Before setting up a wholesale fund in Australia it is important to understand the legal and regulatory requirements that must be met. The Australian Securities and Investments Commission (ASIC) is the primary regulator of wholesale funds in Australia, and all funds must comply with the Corporations Act 2001.
To establish a wholesale fund, the trustee or the investment manager must first apply for an Australian Financial Services Licence (AFSL) which King Irving can assist with. This process involves providing detailed information about the type of fund, including the fund’s investment strategy, the types of assets that will be included in the fund, and the fund’s management and administration structure. The trustee or the investment manager must also demonstrate that they have the necessary qualifications and experience to manage the fund. Alternatively, you can become a Corporate Authorised Representative (CAR) of an AFSL holder, King Irving can assist in the process of identifying an appropriate service provider.
Step 2: Determine the types of assets to include in the fund
Once the legal and regulatory requirements have been met, the next step is to determine the types of assets that will be included in the fund. Unit trusts are the most common type of fund in Australia and are typically used as a vehicle for investing in assets such as property, shares, and bonds.
The fund’s investment strategy will determine the paramaters and types of assets that are included in the fund. For example, if the fund’s investment strategy is to generate income, it may include a mixture of both bonds and property. If the fund’s investment strategy is to generate capital growth, it may include a mixture of equities and alternative instruments.
Step 3: Establish the fund’s structure
The next step is to establish the fund’s structure. This includes determining the fund’s trustee, investment manager and service providers to support the fund such as a fund administrator, fund registry provider, and fund custodian.
The trustee is responsible for ensuring the fund complies with the legal and regulatory requirements, and that the fund’s assets are properly managed and protected. The trustee will also enter into service leval agreements with any external service provider. The custodian is responsible for holding the fund’s assets and keeping accurate records of the fund’s transactions. The trustee may also enter into an investment management agreement with an investment manager (if the trustee and the investment manager are separate entities). The investment manager is responsible for managing the fund’s assets, and making investment decisions on behalf of the fund’s investors.
Step 4: Raise capital
Once the legal, regulatory, and structural requirements have been met, the next step is to raise capital for the fund. Wholesale funds are only available to wholesale, sophisticated and professional investors, these include high net worth individuals and institutional investors (s761G and s761GA of the Corporations Act 2001).
The investment manager will need to develop a marketing strategy to raise capital, including targeting potential investors, providing general information about the fund, and answering any questions that investors may have (if you are only authorised to provide general advice, you must ensure you are not providing any personal advice).
Step 5: Ongoing management and administration
Once the fund has been established and capital has been raised, the trustee and investment manager must continue to manage and administer the fund and comply with any regulatory filing requirements annually. Other functions of the service include establishing accounts, tax solutions, registry services, monitoring the fund’s performance, and reporting to the fund’s investors. This system can also be simplified through the outsourcing of services which can be recommended and tendered by King Irving where appropriate.
The trustee and investment manager must also ensure that the fund complies with the legal and regulatory requirements, and their obligations as an Australian Financial Services licencee or as a CAR.
Setting up a wholesale fund in Australia may seem like a complex process, but through the proper guidance and planning from King Irving, you can set up a fund stress free in no time. King Irving are able to assist trustees and investment managers in understanding the legal and regulatory requirements, establish the fund’s structure, and seek services for raising capital, ongoing management and administration. King Irving are able to provide a road-map for individuals and entities to successfully establish a wholesale fund through a structured and manageable process.