What are the major stages in the life of an investment fund?

Investment funds are entities whose life cycle is part of very standardised phases. From fundraising to liquidation, the management team follows a dynamic and logical path: it raises money, invests and generates shared value with investors. The success of the fund depends on the mastery of each phase.

   Cash-out

First, the manager must define his investment thesis and build his argument to seduce his investors. He will have to explain how he is the right person and why investors would have an interest in placing their money in his hands: he will be able to rely on his professional expertise, his experience as an entrepreneur, his years in finance, his network ...

Once the argument is built, the manager will be able to embark on a road show, meeting potential investors. He will have to reassure them about his good management and his vision of the market, if he wants to convince them of the strength of his project. The essential argument will, of course, be financial, the return on investment, even if other arguments may weigh in the balance.

Investors will be asked to show interest, sometimes manifested by signing a letter of intent. The manager will have set himself the goal of lifting. If this goal is not achieved on the occasion of the first round of the table, the manager can take the risk of a first closure and then leave for another round of the table. He will return to the potential investors of this first levie, hoping that the confidence of the former will attract the confidence of others. Specialized lawyers will structure the investment vehicle to bring together investors.

   Investment

Once investors are reunited, the manager can start deploying the funds under management. The manager will have several years to deploy the amounts invested by his investors. The more files he passes, the more he will be able to sort and seize the best. Its ability to generate opportunities will be a key element in its success, as well as its flair to dwell on the most promising ones.

It must identify opportunities, meet entrepreneurs, do due diligence and negotiate favourable conditions. Once his conviction is forged, he will be able to press the button and make the investment.

Once the stake is taken, the manager will have to do his best to make the one gain in value. Each team has its strengths: some open their network, others help financial structuring, others focus on product development and internationalization. Depending on the strategy adopted, managers will be in the majority or minority in the target and will be more or less involved as a result.

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   Liquidation

If the manager has done his job well, he will have identified high-potential targets and will have accompanied them in their growth. Once mature, the Agency may liquidate its investments. The stakes will be sold with added value, and the money will be distributed between him and his investors.

Once the invested amounts are deployed or liquidated, the manager can start again for a cycle. However, this presentation is schematic. In fact, management companies are active in the various phases at any point in their lives: they raise funds for the next fund, while identifying opportunities; they sell shareholdings, without neglecting to invest in new lines.

The larger the fund, the more these phases are mixed. Specialized teams will work on each of the phases: the specialists in the lifting, the specialists of the sourcing, the more the monitoring specialists ... The smaller the funds, the more investors will ensure that the managers focus on each of the phases. The manager should not be plunged into fundraising for a second fund, even though he had just finished subscribing to his first fund.

The success of a fund depends on the balance between the different phases and the dynamics of the management company, in line with market trends.

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