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Fundraising

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Ask about strategies and tactics for fundraising with a fund, including building momentum, creating pressure, and LP Love. The training leverages proven best practices from fundraising experts with real world guidance from peers
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How Can a Solo GP Best Tackle the Key-Person Clause: Is Strong IC the Solution?

One question getting asked as a solo GP is how to tackle the key-person clause. What's the best way to tackle this? Strong IC?

Top answer:

This will be handled in the LPA. Here is how the Cornerstone manages it for your reference: However, you should simply reply by saying: This will be handled by the LPA and we will work on it together with LPs once we secure the necessa...

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Is Using My Last Name for a Management Company Lame or Should I Choose a More Abstract Name?

Is it lame to use my last name for the management company instead of something more abstract? (My last name is not Andreessen)

Top answer:

Generally, the fund, the GP and the ManCo all share the same name, such as: Orange Capital Fund I, LLC Orange Capital GP I, LLC Orange Capital, LLC

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Community Member
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Should a First-Time Fund Manager Start a Micro VC under Another Fund and How to Approach Potential LPs?

Hi everyone! I hope you’re doing well! I had two questions: 1. As a first time fund manager what do you think of me starting my fund under another funds wings? Essentially starting a micro VC under someone else’s current VC to share the resources with them as well and save on costs. 2. Would Angel investors be potential LPs? What is the best way to approach an LP? Directly ask them if they would invest or warm them up over a period of time? Thank you so much!

Top answer:

1. Please DO NOT do this. It’s a 10+ year investment!!! 2. Yes, most of your 1st close will likely be HNWs/Angels

 -  Mike Suprovici
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Can an LP Increase Their Commitment After Signing a PACT or Wiring Initial Capital?

How would it work if an LP wants to up their commitment after they already signed a PACT? or may be after they already wired money for the first capital call?

Top answer:

Yes they can and this is very common. They can sign an LPA for a larger amount on closing. Happens all the time.

 -  Mike Suprovici
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I’m raising a $10 million fund. What’s the maximum check size of the deal that I should warehouse?

I’m raising a $10 million fund. What’s the maximum check size of the deal that I should warehouse?

Top answer:

It depends on your stage, strategy and model. Read this: https://govclab.com/2022/05/05/how-to-build-a-vc-fund-model/

 -  Mike Suprovici
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How Can I Warehouse, Liquidate, or SPV $2mm in Bytedance RSUs That Don't Fit My Pre-Seed Fund Thesis?

Question about warehousing/liquidating/SPVing Bytedance RSUs a non-thesis holding that doesn't fit my pre-seed fund thesis I have about $2mm in Bytedance RSUs (assuming an implied valuation of $300B). Can't be sold on secondary because of restrictions but they can be transferred via 'forward contracts' that do something similar. I would like to either add to fund or liquidate some of those holdings in Bytedance (about $1m). What are my options? Should I offer this as an SPV on my own? Is there a way to collateralize for a loan the Bytedance RSUs (no bank will do it for these afaik)? Or do I just hold these?

Top answer:

I can only give you advice form the perspective of the fund. Based on your explanation above, it will be very difficult/impossible to move into the fund. Also, since it’s off-thesis, it’s likely that it may not help that much in fundrais...

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What Type of Equity Kickers are LPs Entitled to in Small Funds: VC or PE Standard Agreements?

Hi all - I sent my thesis to a friend who happens to be an institutional investor. He asked me what type of equity kickers they might be entitled to as an LP. I'm tempted to state that the standard agreement is 2/20 again because its such a small fund I don't think I should be building any complexity into the LPA's. What are your thoughts? I'm not sure if this is a VC thing or it is something more common in PE.

Top answer:

This is a pretty bad outcome. This person is staring out of alignment with wanting special terms before they even committed to investing in you … as if those special terms are going to make that much of a difference. Run away. Reply back...

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Is There a Recommended 1-Page Fund Summary Template for Prospective LPs or VPs in Cold Reachouts?

Is there any suggested template (or format) for a 1 pager fund summary to send to prospective LPs or VPs instead of the full presentation where the thesis statement would be too little and the full pitch deck would be too much (for those cold reachouts who would not be available to do an in-person pitch at first)? Mike Adeo

Top answer:

Yes. These simplified overview documents take a few iterations to get right. Here is a template: https://fndri.com/383hpyP

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Community Member
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Is it realistic for LPs to invest in part-time GPs managing funds under $15M for pre-seed/seed investments?

Looking at the pre-curriculum in the  there is a table which helps to relate team size to fund size (attached). My question is how likely is it that an LP would be willing to put in an investment into a GP who is doing this part time i.e. what is shown for funds under $15M? Is it realistic to raise a pre-seed/seed fund with only a part-time commitment?

Top answer:

For any fund at $15 MM and under, the fees are not large enough for the General Partner or Partners to make a living. As a result, it is expected that the General Partners are either (a) not full time or (b) working on a second fund. In ...

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If some of these are “qualified” status do they count as part of the 99 accredited investor limit?

If some of these are “qualified” status do they count as part of the 99 accredited investor limit?

Top answer:

There are "blue sky laws" in the US regarding the number of Accredited Investors in any private investment vehicle that is not registered with the SEC. SEC registration is not realistic for funds. So, you wil need to raise only from Accr...

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Community Member
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How much ROI I suppose to promise or offer my LPs? As best practices?

How much ROI I suppose to promise or offer my LPs? As best practices?

Top answer:

Don’t promise anything. This is a high risk asset class. Instead, you should keep it super high level and say something like: ‘it’s not uncommon for venture funds to target a 3-4x return in a medium scenario and 8x+ in a high scenario’

 -  Mike Suprovici
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How to Address LPs' Questions About Adding a Venture Partner to Our Website and Fundraising Deck?

How should I address questions from my existing LPs if they get surprised about adding a venture partner to my website public presence and to my fundraising deck?

Top answer:

It doesn’t affect them at all, and shouldn’t be a problem. LPs are in the LP entity, VPs are in the GP. You should mention this as positive news in your updates and that it will help them get a better return.

 -  Mike Suprovici
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How Will LPs React to Onboarding an Ex-Minister Facing Prosecution for Unlawful Enrichment, Despite Likely Acquittal?

Hello we need your help. How the LP's may react to onboarding as an advisor a former Minister who may face prosecution for unlawful enrichment ? He will be at 999% acquited from those charges but do we agree that it is a No-Go ?

Top answer:

They will likely react negatively. It’s not worth it.

 -  Mike Suprovici
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On the Fund Overview what is meant by 'Fund Rules'

On the Fund Overview what is meant by 'Fund Rules'

Top answer:

It's where you disclose certain rules related to conflicts or other matters. Here are some example fund rules:  • GPs must exclusively invest from the fund and are not allowed to Angel invest  • All investments go to IC etc…

 -  Mike Suprovici
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How to Build a Track Record for Fundraising by Offering Advisory and Access in Exchange for Equity?

Hi guys! As I am building my track record to strengthen my ability to fundraise I need advice on offering advisory and access in exchange for equity in the business.... I know a few startups that I could approach but that doesn't mean they would be suitable for the fund as I didn't access their financials etc. How should I move forward to build the track record given the limited time I have to build it before the fundraising?

Top answer:

Just start helping amazing companies without any expectations of equity. Help them get to new rounds of financing. Then, you will build network effects, and maybe some of the founders will introduce you to other founders or offer you the...

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What Discounts Should Be Offered to Early LPs: Management Fee or Carry Discount and How Much?

What kind of discounts make sense for key early LPs? For example if I have a good friend and multi-year partner who wants to come in and can put in 3-5% of the fund and he asks for a discount to go at higher end of that. My fees are typical 2/20. Should I offer management fee discount or carry discount? How much is reasonable?

Top answer:

We strongly recommend that you do not discount your fees. You normally discount fees through a Side Letter, and Side Letters are public to other Limited Partners. So, every Limited Partner will ask for a similar deal, which places you in...

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Is Investing in a Management Company Worth It? Pros, Cons, and How It Works

Steve Bennett mentioned investing in a management company. Is this a thing? How does it work and what are the pros and cons? I know that some friends of mine would be potentially interested I wonder if I should offer them that

Top answer:

We strongly recommend that you do not take investments into the Management Company. The Limited Partner will own your outcomes for decades. Instead, the best practice is to take investment into the General Partner, which is converted in ...

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Community Member
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Is Raising the Education Fund Goal from $15m to $50m Beneficial for Attracting Investors?

Been advised that for the ambition my education fund has and the types of investments it will make (in companies and initiatives) the $15m I had in mind is too low and may dissuade some folks from getting involved - been encouraged to look at a higher number e.g. $50m with $15m as a first close. Thoughts?

Top answer:

It will be extremely challenging for a first time manager to raise a $50m fund. The majority of LP archetypes do not invest in new managers. You should raise a smaller fund to prove out the thesis and to build your track record. Then, us...

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Is Establishing a C-Corp Accelerator with $3M/yr Funding from a Japanese City a Viable Long-Term Ecosystem Strategy?

We are building an accelerator backed by a city in Japan. Because of their budgetary process they will be putting about $3M/yr in 3 consecutive years. We currently are planning to establish a c-corp for the accelerator and operate it for a few years before adding funds. So the accelerator c-corp works as a vehicle for investments. We are designing it in this way for the longer-term ecosystem creation perspective - i.e. getting longer and more active commitments from Japanese CVC's. After sitting on two AMAs I got a feeling this is not such a good idea. Would you give us your thoughts on this? (Note that as we need to present it for the city council's budgetary approval in a week or so we would like to see good bad ugly of this premature idea...)

Top answer:

C-corps have certain tax implications that will not not make fund investing viable in many cases. Most funds are setup as flow-through entities such as LLCs.

 -  Mike Suprovici
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Is anyone else running a US feeder fund into a main EU fund? Would be great to hear your insights.

Is anyone else running a US feeder fund into a main EU fund? Would be great to hear your insights.

Top answer:

This is prohibitively expensive. You need a $25 MM fund size to justify this, and it really would only work if you had many LPs and portfolio companies in both jurisdictions. The EU is too expensive as a domicile for most new managers. ...

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Community Member
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Is it OK to ask a Venture Partner to bring LPs with a commission fee?

Is it OK to ask a Venture Partner to bring LPs with a commission fee?

Top answer:

Absolutely not. You can not incentivize Venture Partners with commissions because that would be in violation with numerous broker dealer laws. 

 -  Mike Suprovici
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Should I Include Team Members Conditional on Fundraising and How to Communicate Their Value to Investors?

Regarding team composition I have an agreement with two people that would join the fund if I raise above a specific amount. Should I include them? If so how can I communicate it in a clear value-adding way to potential investors?

Top answer:

It's not legal in most jurisdictions to compensate individuals based on fundraising goals due to various broker-dealer regulations. 

 -  Mike Suprovici
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Do LPs Commonly Sign Up for Net Return Multiples Regardless of Hurdle Rates?

There was some discussion on hurdle rates recently but what about net returns? For LPs that do not insist on hurdle rates (or even if they do) is it common to sign up to a net return multiple?

Top answer:

Hurdle rates and net return multiple are very uncommon in Venture Capital funds. 

 -  Mike Suprovici
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How to Effectively Word a Fundraising Message for Weak Connections?

Hey everyone I am reaching out to weak connections to fundraise. Any advice on how to word my message? Should I start with small talk initially or go to the point straight up? Any templates that you used would be appreciated!

Top answer:

One of the most effective activate weak connectors is to have them make a connection to another connector. 

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Community Member
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Should Our Fund's Currency Be SEK or USD Considering the Majority of LPs and Investments?

Our fund is domiciled in Sweden (Currency SEK). 75-85% of LPs are in Sweden. But 95-100% of investments are in USD. Should we just have the fund currency be SEK or does it make more sense to still do a USD fund?

Top answer:

If 95%+ of investments are in dollars, keep it in dollars and talk with your bank about their capabilities on this matter.

 -  Mike Suprovici
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How to Showcase Your Track Record with Confidential Deals and Influencer SPVs?

regarding this _'(Track Record) Examine your Track Record of Past Deals. First identify the top five Past Deals that you have either invested in or had a role in writing the name of the company and a few words describing the business. Next think back to exactly how you initially discovered each opportunity and write a sentence that describes how you sourced each Past Deal. Then quantify how each Past Deal will be attractive to Limited Partners by looking at how the company grew how the valuation increased or how much money was generated by the exit and write a sentence about how value was created at each Past Deal. Lastly reflect on how your actions increased the value created at each Past Deal and write a sentence on your Value Add for each business.'_ - if most of your deals have been through angellist syndicates which contain confidentiality rules that mean you can't name the businesses you've invested in through them plus one deal that you can name that was brought to you as part of an influencer SPV (e.g. given equity) how should you handle this?

Top answer:

You can't use deals done through SPVs as track record unless you sourced and led the syndicate. 

 -  Mike Suprovici
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Can venture partners also be LPs?

Can venture partners also be LPs?

Top answer:

Yes, Venture Partners can also be LPs. However, if they make investment decisions for the fund, that may affect their limited partner status. 

 -  Mike Suprovici
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What do you think of the response from an LP who declined to participate in the fund?

What do you think of the response from an LP who declined to participate in the fund?

Top answer:

It’s just a no. I would not put too much weight on the reasoning for now. That being said, for your reference, VC is a good way for families to build inter-generational wealth.

 -  Mike Suprovici
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Which Platform is the Most Cost-Efficient and LP-Friendly for Forming a Delaware Fund: AngelList, Carta, or Allocations?

Hello all Which platform is cheaper efficient and LP friendly for forming a delaware fund? I have seen AngelList Carta and Allocations but dont know which is better. Any thoughts?

Top answer:

We don’t recommend any of the above platforms. AngelList and Allocations are designed for part-time investors or amateurs and Carta has various operational issues. Please do not engage with any of them, and don’t spend any time on this r...

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Should You Require a Signed PACT Before Sending a Deck, or Can Steps 2 & 3 Be Combined?

Should you send the PACT first and require it be signed before sending a deck? I know this has been answered 100 times over but I have conflicting information in my notes from different webinars we’ve seen. Is it step 1) meeting 2) get pact signed 3) send deck? Or can step 2 & 3 just be combined.

Top answer:

I recommend (1) call, (2) email follow up, (3) PACT, (4) deck and (5) meeting. This is a similar approach this is outlined in the Decile Hub stages layout.

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Community Member
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Has Anyone Discussed DAF Structures with LPs for Impact-focused Funds?

Hi all! Has anyone been asked about DAF structures from LPs? For context my fund has an impact lens and I'm looking to find ways to align with LPs who are interested in that above financial returns alone.

Top answer:

Larger LPs generally do not invest in new managers, and donor-advised funds are a vehicle targeted at larger LPs.

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Community Member
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How Can I Convince a Potential LP That Remote Work Doesn't Hinder Networking and Success?

Just got feedback from a sophisticated potential LP who has worked in alternative assets: “Hey you’re not in SF! You need to be at the center of it all and networking with founders at parties every night!” How do I push back with my preference to be remote?

Top answer:

Build a rebuttal by saying that startups are being launched everywhere now and, a lot of alpha will be generated in the future outside of SF. There are a lot of stats that show this.

 -  Mike Suprovici
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Is There a Significant Difference Between Angel Funds and Pre-Seed Funds for Founders and Investment Structures?

From everything I've read so far and the founders I've spoken to there does not seem to be a strict demarcation between an angel fund and a pre-seed fund. Is this something more relevant for LPs than for founders? Is there a difference in the way an investment is structured? Thank you!

Top answer:

From an LPs perspective, the stage is being standardized as pre-seed right now, so use that. When you use the term Angel, it indicates that you’re doing an Angel group model, which is quite different because you’re essentially syndicati...

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How Long Can Partners Work on Fund Formation Without Compensation, Maintain Side Jobs, and Pay Themselves After the First Capital Call?

How long do partners have to work on fund formation without being compensated? Is it possible to have a side job during this period? Can you pay yourself after the first capital call?

Top answer:

You will pay yourself with the 1st capital call. It is possible to have a side job before you do the 1st capital call.

 -  Mike Suprovici
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How to Showcase Venture Partner Track Records with Confidential Deals in Data Rooms?

Any tips for A. Positioning venture partner track records in data rooms and (relatedly) B. Articulating track records that include confidential deals? (I have a venture partner who does technical dev for a lot of well-known agtech co's but that work is largely confidential)

Top answer:

a. you do this in in the bios folder by including their CV which should highlight some of their achievements b. you redact the name of the companies

 -  Mike Suprovici
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What is the Best Approach for Sharing Fund Slidedeck with Potential Referrals from Family Offices?

Had a call yesterday with a connector who offered to make referrals to a number of family offices he is currently working with. They are likely to be good quality/well targeted referrals. He asked me to send the fund slidedeck over so he could forward it to them. What should I do here? Just send the two page summary and hold the deck back. Or send the whole deck? Or a trimmed back version of it? It will be going to quite sophisticated potential LP's so I think maybe not a problem to send the whole thing? I can gate them with access to more detailed information (fund model deal memos data room etc) if things progress.

Top answer:

There are general solicitation issues, and the there are pitch control issue. First, your deck should never be sent without a document management system, like Decile Hub. From a general solicitation standpoint, this should not be done, t...

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Community Member
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Do Recent Angel Deals Matter to LPs Despite Limited Traction Visibility and Do Deal Size or Number Matter?

Would showing angel deals done recently be helpful as part of a track record to share with LPs or not really since no traction will be visible in such a short span of time? And if yes would they also care about number or size of such deals?

Top answer:

Angel deals are great if you can show the companies are growing. LPs don’t care much about the # of deals. It’s how successful you were with investing in those deals.

 -  Mike Suprovici
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Do Universities Contributing to Org Expenses Without Being LPs Still Need to Sign a Pact?

If we have a university want to put money towards the fund but they can't be an LP they just want to put money towards org expenses do they still sign a pact?

Top answer:

There has to be a contractural relationship for you to receive money. They either need to invest in the Limited Partnership or the General Partnership.

 -  Mike Suprovici
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What are the basics of LP term sheets and investor qualifications for first-time fundraisers?

I'm a first time fundraiser and I have some super basic questions: Is there a standard or basic term sheet for a LP? Is anyone who wants to invest considered an LP?

Top answer:

As you accelerate your pitching you will use a PACT to collect interest. Then after you have $1m+ or more collected in PACTs, your law firm will help you incorporate all the entities and governing docs. Then you will send LPs an LPA to s...

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Is It Suitable to Ask LPs About Their Investment Focus and First-Time Fund Involvement?

Is it appropriate - as a conversation starter e.g. at a conference in 1:1 conversation - to ask an LP (Corporate Corporate VC HNWI or Family office) what their investment focus is and if they only make direct investments or also invest in first time funds (without speaking about the fund thesis to avoid public solicitation)? If they ask us we can then lead the conversation over to what we work on?

Top answer:

You should try to build some rapport before you discuss the topic. Then, the questions should be something like this: 1. Do you invest in new mangers? 2. How many have in invested in last year?

 -  Mike Suprovici
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Is it Common to Disclose Investment Terms and Co-Investors for Warehoused Companies to Prospective LPs?

In discussions with prospective LPs re participation in fund is it common / ok to disclose investment terms for warehoused companies including other co-investors etc?

Top answer:

Yes you can disclose the terms. It’s usually not good practice to mention co-investors unless you have permission.

 -  Mike Suprovici
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Do You Recommend Attending Fundraising-Focused Meetups for Building a Network of Potential LPs?

While building our network of potential LPs do you recommend meetups that seem to be designed for fundraising?

Top answer:

You can not generally solicit interest from LPs and there are no “secret lists” that work. You need to use Connectors and mine your existing network to find LPs. If you are going to do an event, it needs to be a small private dinner or ...

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Community Member
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Is it advisable to include an Anchor in the Fund Overview Doc, despite it being considered old-fashioned?

Regarding the Fund Overview Doc it mentions an Anchor. I seem to remember it being considered a bit old fashioned. As it happens I’m hoping to be celebrating having one. Should I include it when it lands?

Top answer:

You can remove the Anchor section in your Fund Overview document if you don't plan to have one, which is common for new and emerging managers.

 -  Mike Suprovici
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