What is a management company?

In principle, every investment fund needs a management company to manage its day-to-day business and investments.

Gaspard de Monclin
Gaspard de Monclin
Mis à jour le
18/11/2024

The management company is the legal vehicle that serves the manager to run an investment fund. The investment fund is only a pocket of money, very often without legal personality and no representative. It takes an entity to manage this money, in the interests of investors. This entity will be the management company.

The investment fund is a headless body whose management company is the brain. The shareholders of the management company are more or less experienced managers. They're the pilots of the pilot.

The management company plays a key role: upstream, it has taken the decision to raise the fund, defines the investment thesis, convinced investors, negotiated the terms. Once the fund has been lifted, it manages it on a daily basis, chooses investment and disinvestment opportunities, incurs the fund’s expenses (lawyers, accountants, custodians, etc.). Finally, it decides on liquidation, repays investors and shares added value.

It is therefore at the forefront of the entire management of a fund. Success depends entirely on its competence. Its mistakes are detrimental to all investors. It can make bad investment choices, but cannot afford management misconduct, otherwise it will be held liable. Because it has a responsibility to manage sums of money that does not belong to it, the regulator will be vigilant in its supervision. It may be punished under criminal law in the case of a financial offence.

A fund is no longer nothing without its management company, like a headless body. The regulation must therefore provide for control mechanisms so that the management company does not change or that its managers remain in place.

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