1/ How to raise a real estate fund (and, ideally, avoid getting sued)

Have warned everyone it’s better to raise capital deal-by-deal, bc it’s easier to raise & bc it's better for the sponsor. Still, there’s interest in learning how to do a fund… so, here goes.

2/ Don’t think of doing this unless you have a record of successful deals, ideally mostly/all in the same asset class / strategy.

Remember: You will be asking LPs to invest in YOU; they need to feel like you know what you’re doing.
3/ Really helps to have a list of prospective LPs BEFORE you start your raise. The more high-quality leads you have, the more likely you are to succeed. (I built my list via my blog initially; now twitter leads predominate - see my bio.)
4/ Find an experienced attorney. Doesn’t need to be a huge, expensive firm, but you want someone who has done a lot of private offerings before. Don’t agree to a big fee yet… at first, you just want a few hrs of her time for advice.
5/ Find an experienced CPA. Ideally, your existing CPA has worked on a lot of private deals before. If not, get a new one. Prospective LPs need confidence that someone good is overseeing the bookkeeping and doing the tax prep.
6/ Structuring the fund: How much are you raising? Is it a 5% pref or an 8%? Who gets what upside? This is where the experienced attorney & CPA come in… they should be able to tell you what “market” is, where you can push, etc.
7/ Overlooked issue: How much you’re raising. Target is so important - you want to be ambitious, without setting the bar so high that you look like a failure if you miss (our Fund 1 targeted $10MM, got $3.8MM. Whoops!)
8/ Overlooked issue: Closing dates. Want multiple closings: Initial Closing (“IC”), when 1st LPs join & at least one more. It’s hardest to get earliest $, so incentivize it to come in at IC. Want another close bc it’s easier to raise once there is social proof.
9/ Once you have proposed terms, go talk to most likely / largest potential LPs, to make sure they like the strategy and proposed terms. No sense in spending $$$ & time to do the docs if you’re going to get quick “no’s” from your list.
10/ Assuming LPs are on-board, it’s time to hire the lawyer to prepare docs: Operating Agreement governing the fund entity (prob an LLC), Private Placement Memorandum explaining terms, then Subscription Book for people to sign to join.
11/ Now you need a marketing deck. I tried to market Fund 1 w just the PPM - dumb. Even sophisticated investors respond to pics, charts, etc. So hire a good designer. Make sure attorney blesses final product.
12/ Now you’re ready to go. Reach out to the people on your list with a short email and the deck. Remember, you’re not selling an investment yet… right now, you just want a call or meeting to discuss.
13/ For us, getting to a “yes” from an LP typically requires at least one, and sometimes two, hour-long calls, then often some follow-up email exchanges for clarification. Big LPs will want to do more diligence… be willing to be transparent.
14/ At this point, you should have a spreadsheet (or, even better, a CRM) showing all your prospective LPs, where you are in the process with each, and whether they’ve “soft-committed” or “hard-committed”.
15/ A “soft-commit” is verbal or emailed confirmation they’re in, plus an amount. As you get close to the closing date, follow up & ask “soft-commits” to complete the subscription booklet. A completed sub book is a “hard-commit”.
16/ Once you hit your minimum raise (ideally, before scheduled closing date), tell everyone on the fence that the deal is actually happening. You’ll be amazed how many fence-sitters end up coming in, once the fund is real.
17/ Closing is signing the sub books, signing the Operating Agreement, and distributing counter-signed sub books and executed OA to your investors.
18/ Now, the hard part begins… you’ve got to go find good deals to do, or this will be the only fund you’ll ever raise!

More from Economy

What do a Tory Peer, Selwyn Gummer (Lord Chadlington), David Sumner ( Sumner Group Holdings) and the Sanchez Perez family (drugs money, laundered through Gold mines) have in common?

It’s another company-saving a £50 million PPE contract shaggy dog story

Connections, connections


What a start to the story

“A bulletproof truck trundled down the road in downtown Lima, guarded by 18 policeman
They were wearing body armour & wielding high velocity rifles

No-one was taking any chances
This was a Special delivery for Peruvian Prosecutor for an anti drug trial


That was in 2011, the same year that Lord Chadlington’s daughter got married in Chadlington to Henry Allsopp.

Who was there?
Yes Kirstie Allsopp of Location, location, location and all this Covid nonsense fame) is his sister

Camilla, his Godmother

Jeremy Hunt

Cameron


Well. Come on. Lord Chadlington had been chair of the local Witney Conservative Association. It’s only fair.

Hang on. Julian Wheatland, Director of SCL Group/ Cambridge Analytica had also been chair of Witney Conservative Association...and campaigned for his mate Cameron

Are we sure Julian Wheatland and his side kick Alexander Nix were not there too @JolyonMaugham ?

I mean. They move in the same North Oxford circles.
1/ Trend Factor: Any Economic Gains from Using Information over Investment Horizons? (Han, Zhou, Zhu)

"A trend factor using multiple time lengths outperforms ST reversal, momentum, and LT reversal, which are based on the three price trends separately."

https://t.co/udkvsdw2Lz


2/ This resembles combining multiple measures of ST reversal, momentum, and LT reversal (forecasts determined by walking forward rather than using signs from the full sample).

Unlike normal moving average signals, these are *cross-sectional.* More below:
https://t.co/wkIFLg9jtK


3/ Unsurprisingly, the Trend factor formed by this approach outperforms benchmarks in terms of both Sharpe ratio and tail metrics. It's combining momentum with two factors that are negatively correlated to it AND using multiple specifications.

More here:
https://t.co/x8Tloz3iyL


4/ "Average return and volatility of the trend factor are both higher in recession periods. However, the Sharpe ratio is virtually the same.

"Interestingly, all of the factors still have positive average returns.

"Momentum experiences the greatest increase in volatility."


5/ "In terms of maximum drawdown and the Calmar ratio, the trend factor performs the best.

"The trend factor is correlated with the short-term reversal factor (35%), long-term reversal factor (14%), and the market (20%) but is virtually uncorrelated with the momentum factor."
The argument for deficits & debt raising interest rates in the US is not increased credit risk, it is that interest rates are a function of economic fundamentals, flows & policy. Deficits/debt change those.

I can't tell if I'm agreeing or disagreeing with @jc_econ.


Increasing government spending or reducing taxes increases demand (or reduces saving). This raises the price of loanable funds or the interest rate.

In a dynamic context, more demand means a stronger economy, the central bank raises interest rates sooner, and long rates rise.

(As an aside, we are not close to the United States needing to worry about credit risk and the risks are more overstated than understated in most other advanced economies too. But credit risk is not always & everywhere irrelevant, just look at the UK in 1976 or Canada in 1994.)

Interest rates have fallen over the last 20 yrs while debt has risen. This does not necessarily mean that debt rising causes interest rates to fall. It could also mean that other things have happened at he same time that pushed down interest rates more than debt pushed them up.

The suspects for these "other things" include slower productivity growth, slower popln growth, higher inequality, less investment, etc. All of which either increase the supply of saving or reduce the demand for investment, reducing the equilibrium interest rate.

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Post that the plight of the


Example 2: Booking profits when the stock is extended from 10WMA

10WMA =


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Too many green days!

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