How To Raise A Fund To Invest in Crypto
How To Raise A Fund To Invest in Crypto
You found a quant fund posting >5% monthly. You want to raise outside capital and pipe it in with a clean 12% hurdle and a fair waterfall. This page shows the exact structure, the documents, and the traps to avoid. No fluff.
What You Are Building
A fund-of-one or small feeder that allocates to a single external crypto quant manager. You control investor onboarding, fees, and reporting. The master account holds the subscription into the quant fund. Your job is governance, DD, and investor care.
Pick A Structure That Won’t Bite You Later
| Setup | When To Use | Notes |
|---|---|---|
| Single Delaware LP (feeder-only) | All LPs are US. Target raise ≤ $10m. | Cheapest. Invests directly into the quant fund. No offshore block. |
| Master-Feeder (Cayman master + Delaware feeder + Cayman offshore feeder) | Mix of US taxable, US tax-exempt, and non-US LPs. | Standard play. Offshore feeder captures non-US and tax-exempt money. |
| EU wrapper (RAIF + third-party AIFM) | You plan real EU marketing from day one. | Heavy lift for $5m. Most skip this at launch. |
US Compliance Snapshot
- Offering rule: Reg D. Choose 506(c) if you want open marketing, or 506(b) if you will raise quietly.
- ’40 Act: 3(c)(1) for ≤100 beneficial owners or 3(c)(7) for qualified purchasers only.
- Carry rule: charge performance fees only to qualified clients in the US feeder.
- Form D + Blue Sky: file at first close and handle state notices.
- CFTC check: if the look-through hits futures/swaps exposure, confirm CPO exemptions before launch.
Terms That LPs Respect
| Term | Recommended Setting |
|---|---|
| Waterfall | Return of capital → 12% preferred return to LPs → 100% to GP until 20% catch-up → thereon 80/20 split. High-water mark. Annual crystallization. |
| Management fee | 0.5% to 1.0% on feeder NAV. You are a feeder, not a trading shop. |
| Liquidity | Match the quant fund’s dealing. If the underlying is quarterly with 60-day notice, copy that or be tighter. Gate at the master if the quant fund can gate. |
| Lockup | 12-month soft lock with a 2% early exit fee to protect the pool. |
| Expenses | Admin, audit, tax prep, legal, banking, and due diligence travel as fund expenses. No junk fees. |
Documents And Providers You Need
- US feeder: PPM, LPA, Subscription docs, KYC/AML pack, Reg D file, side letters if needed.
- Cayman master/offshore feeder: offering doc, LPA or Articles, CIMA registration, AML officers (AMLCO, MLRO), FATCA/CRS.
- Service stack: fund admin that prices digital assets, auditor with crypto chops, US and Cayman counsel, tax advisor, banking and custody. If you take stablecoins, use regulated rails only.
- Side letter with the quant fund: fee break, capacity, transparency, redemption alignment, key person and notice on strategy drift.
Marketing In EU/UK Without Tripping Wires
If you plan to talk to investors in Europe or the UK, follow each state’s private placement channel. No retail blasts. Keep legends tight. Or keep it simple at launch and raise from your US network first.
Build Timeline And Budget
| Phase | What Happens | Typical Cost |
|---|---|---|
| Weeks 1-2 | Mandate legal, admin, auditor. Draft term sheet and IMAs. DD the quant fund. | $15k-$40k initial legals |
| Weeks 3-6 | Finalize docs, open accounts, KYC workflow, CIMA file if Cayman, Form D at first close. | Admin $25k-$45k/yr, Audit $20k-$40k/yr |
| First close | Accept initial subscriptions. Wire to the quant fund per their dealing day and notice. | Blue Sky and sundries a few thousand |
Key Risks You Must Disclose
- Exchange or custodian failure. Even big names can break.
- Counterparty risk in perps, swaps, or prime brokerage.
- Liquidity squeezes and gates at the underlying fund.
- Stablecoin de-peg and blocked chains. Sanctions screening delays.
- Model drift at the quant fund and performance dispersion.
- Tax changes, reporting rules, and regulator interventions.
Quick FAQ
- Can I pay monthly distributions? Only if the master can redeem monthly. If the underlying is quarterly, keep payouts quarterly.
- Minimum ticket? Set it high to keep your cap table clean. $250k or $500k helps on verification.
- Audit? Yes. Annual audit with a firm that knows digital assets.
- Carry to small US investors? Only if they are qualified clients. If not, remove carry or gate the US feeder accordingly.
- Marketing? If you use 506(c), verify accredited status with real checks. No shortcuts.
Need Help Structuring Your Crypto Feeder Fund
We draft terms, run diligence on the quant manager, set up Delaware and Cayman, handle admin and audit onboarding, and manage the first close.
Start Your Raise With Financely
Share your LP profile, target manager, liquidity terms, and target first close date. We will revert with a clear scope, fees, and timeline.
Contact UsDisclosure. This page is informational and not legal, tax, or investment advice. Any fund launch is subject to counsel review, KYC/AML, and applicable private-offering rules. Digital assets carry market, counterparty, and operational risk. Do your own diligence before committing capital.
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