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Launching a Crypto Investment Fund via a Platform vs A Stand-Alone Fund Structure

Crypto Investment Fund Platform - Crypto Hedge Fund Solutions

Having worked on many fund launches for crypto investment fund managers, we have seen, first hand, the time and cost involved in setting up and launching a crypto investment fund. This article, provides an overview of the pros and cons between setting up a fund form scratch compared to launching via a regulated crypto fund platform such as CV5 Digital.


Background

It used to be the case that launching a hedge fund, in the Cayman Islands, was cost and time efficient since an exemption from regulation existed that provided that the fund you launch had 15 or fewer investors whom were provided with the right to elect to remove the operators of the fund i.e. the directors of the board. This meant that launching a fund did not require the appointment of a fund administrator, did not require the appointment of an auditor, did not require the appointment of registered directors, did not require the appointment of compliance officers at the fund level, did not require the payment of regulator fees and to conduct filings with the regulator, did not require reporting for FATCA and CRS, and did not have prescribed requirements on asset valuations, segregation of assets etc to provide protection to investors. In essence, the process was quick and cheap. However, this is not normally something that would provide comfort to investors. Even less so for those investing in an emerging asset class such as crypto.


With changes in Cayman laws and regulations, there is now a requirement for almost all Cayman investment funds to have the aforementioned services and requirements, as standard. As a result, the process of setting up a fund takes longer, the upfront and ongoing costs and expenses (total expense ration or TER) are higher than most managers appreciate and the need to have support on the ground going forward is important, if not, crucial, to ensure compliance with regulations and avoid regulatory penalties for infringements. In addition, regulatory powers of enforcement for non-compliance have increased also.


Benefits of Launching via a Crypto Fund Platform

Launching a crypto fund via a ready made platform has little if any downside compared to creating a stand-alone fund from scratch. Launching via a platform is more cost effective, avoids the usual upfront legal costs associated with setting up and structuring a crypto investment fund, the extensive time spent selecting service providers and the lack of support going forward to ensure compliance, provide substance to your fund, advise on changes or developments going forward and ultimately support operational processes, and to provide additional services that enhance the fund offering depending on the region that it is marketed. We have seen fund managers missed windows of opportunity by spending months setting up their fund by which time the market has changed a great deal based on their original strategy or investors have not had the patience to wait and found alternative opportunities.


CV5 Digital - Crypto Investment Fund Platform

CV5 Digital provides an institutional grade platform for asset managers to launch and manage a crypto investment fund or a fund range, leveraging the expertise in digital assets that we have garnered over a number of years in the industry. The ability to launch a crypto investment fund is 4-6 weeks and with competitive and transparent fees so crypto fund managers can focus on raising capital, managing their fund and creating an audited track record.


For further information on CV5 Digital, please contact us: info@cv5capital.io



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