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Starting my own fund for family and friends

Discussion in 'Investing Strategies' started by imaginator, 22nd Nov, 2008.

  1. imaginator

    imaginator New Member

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    Hi

    I am considering starting my own fund, by issuing shares to family members and friends to invest in my fund. (Something like how Warren Buffett started in 1969). I consider this to be better than borrowing money from my family for me to buy shares in my own name... in the sense that they can see it as their investment as well.

    A few considerations,

    1) What is the best structure? Pty Ltd Company or Unit Trust?

    2) Say I start out with 1000 shares in the company or trust. And say, people invested a total of $20,000 in my fund. Therefore each share = $20 ? In the event that I want to invite new investors, without any old investors selling, what happens? Do I issue new 500 shares, but how to calculate the price? How does this new issue affect the holdings and price of my existing investors?

    Please openly discuss.
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    The first questions are:

    Why would someone give you money to invest ? Why you and not a professional fund manager ?

    Do you have a track record ? Do you have a detailed investment strategy ?

    How many investors are you likely to have ? Will you be issuing a PDS ?

    What will your MER be ?
     
  3. imaginator

    imaginator New Member

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    well its because we do not believe in those funds that only buys normal blue chip stocks, and charge heavy fees.

    I have in the last year selected better stocks than most mutual funds, since i invested in commodities and sold them before they came down. Some of my shares went up 100% in a few weeks. BUt i only had a few thousands to invest with my own money, hence i would like my family to invest with me.

    This fund i would like to set up is a more private thing, only family members are invited to invest. Anything wrong?
     
  4. AsxBroker

    AsxBroker Well-Known Member

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    Hi Imaginator,

    Buffett actually took over Berkshire Hathaway which was an ailing textiles company, he didn't actually start the company...You could scour the ASX for a micro cap company to take over...

    Cheers,

    Dan
     
  5. Mark Laszczuk

    Mark Laszczuk Well-Known Member

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    You've just read Buffettology, haven't you? Go speak to a lawyer who handles these sorts of things. While you're there, think about these two rules:

    Rule 1: Never, ever invest, go into business with or lend money to family or friends.

    Rule 2: If in doubt, see Rule 1.

    Mark
     
  6. imaginator

    imaginator New Member

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    the first time Buffett started his partnership, he got 10 doctors to each put in $10,000 into his fund.
     
  7. vandalic

    vandalic Active Member

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    Sounds like he just read Snowball.

    I agree with the friends/family comment. Don't mix business with pleasure.
     
  8. C3PO

    C3PO Well-Known Member

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    Admirable intentions & you are to be commended for your idealism.

    Does anyone know if you need a license in order to promote an investment scheme such as this? I thought you could not offer to investors without prospectus etc etc

    I think the comments regarding being v careful about getting into business with family are well worth thinking about too.
     
  9. Jen

    Jen Member

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    Maybe instead you could start something akin to an investment club, where members put money together for the purpose of investing in shares. The ASX has information and guidelines for forming these types of clubs, with lots of info about setting it up, legal requirements, banking, brokers etc. Perhaps if you read the info on the website, it could give you some guidance and more information on a different way to achieve your aims.
    Go to Australian Securities Exchange - Stock Market Information, Stock Quotes - ASX and look on the right for "investment clubs"
     
  10. Mark Laszczuk

    Mark Laszczuk Well-Known Member

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    imaginator,

    Understand that this is not 1960-something and we don't live in the U.S. Go see a lawyer. Someone should, at the very least, be willing to provide you with a basic outline of cost and what's required.

    Mark
     
  11. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I believe the "investment scheme" must be registered and a PDS must be issued if you seek funds from more than 20 investors ... so he could probably get away with a simple company or a unit trust structure.
     
  12. 1300 GET A PLAN

    1300 GET A PLAN Active Member

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    Best way to ruin a family. Involve money.

    Keep making money for yourself.

    If you want your family to have more money, consider giving it to them, no strings attached.