How to Start a Fund Without a License

Hey, everyone! Today I want to tell how to start a fund without a license!

I’m Bridger Pennington and last year at Fund Launch we helped launch 120 different funds!

Be aware that this is not financial advice, just my opinion and what I’ve learned from experience launching 3 funds.

My advice goes for private equity, real estate, debt, and all other kinds of funds!

Under or Over $150M?

If you manage $150M aum, then your fund falls under the state laws.

Any fund above $150M aum is regulated on the federal level; there is no in between.

Being under that benchmark means that you would file as an Investment Advisor (IA), and fund managers over $150M aum register as an RIA.

Passing the Series 65 exam is recommended for either party.

What does this look like in the fund structure?

Aside from the GP and LP, consider setting up a management company.

This company, or entity, would be your IA or RIA. That is, an advisor for the Limited Partnership.

This advisor entity would give advice and be paid 2% per year (on average).

A benefit of doing this is that you advise the fund, not the investors. Obviously, you are trying to help the investors, but you don’t have to answer to them directly.

You can explain that you have a fiduciary responsibility to the fund, and an individual investor.

What if I Don’t Have a License?

There is a way around a license, but I suggest you get written clarification from a lawyer…

Most U.S. states have legalized Exempt Reporting Advisors (ERA).

At the state level, this is how you can become exempt from obtaining an IA, Series 65, or RIA title before giving investment advice.

There is a way around a license on the federal level, too, but I would suggest you just get your Series 65.

Hedge Funds

Hedge fund advisors usually have their Series 7 and set up a Broker-dealer entity.

However, this might actually be more difficult than setting up an RIA…

I suggest using a Prime Broker entity, which is a generic bundle of investment services that is offered by banks and firms.

You would issue your trades through the Prime Broker, which gives you many trading options.

The only license you would need in this situation is the Series 65 because you’re giving investment advice and getting paid a 2% fee.


So, is it possible to start a fund without a license?

It is, due to the ERA. However, I would suggest getting your Series 65.

If you want to learn more about RIAs or starting your own fund, then visit Fund Launch!

That’s it for today!


Bridger Pennington

Want to get direct guidance for your fund? Schedule a time with my Fund Advisors!

DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the author

Leave a Reply