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7 Fundamental Considerations When Contemplating a Private to Public Fund Conversion

by Jay Laurila, Camille Clemons

January 22, 2025 Investment Company Tax, Alternative Investment Funds, Exchange-Traded Funds, Mutual Funds

Recently, we were fortunate to participate on a webinar for the Alternative Investment Management Association (AIMA) discussing the hot topic of converting an existing private fund to a registered fund, versus launching an entirely new one.

Below are a few of the critical variables the panel discussed that come into play when making this important decision for your fund.

1. Scale and Funding

Starting a registered fund is costly due to higher initial and ongoing expenses, among them SEC, audit and legal fees. Substantial initial scale is crucial. This scale helps in managing the startup costs and operational expenses both at launch and ongoing. For new funds, securing a significant source of funding to seed the portfolio is challenging but essential; this is one reason managers consider converting an existing fund

2. Investor Relations and Conversion Feasibility

If there is already a fund with willing investors, conversion may be the easier route. This option requires extensive discussions with investors to ensure their willingness and understanding of the changes in moving from a structure in which they initially invested and the nuances of the new fund structure. This route benefits from several aspects, including existing relationships and potentially lower initial costs compared to starting anew.

3. Tax Considerations and Compliance

Converting a private fund to a public one involves navigating complex tax laws and regulations primarily designed for open-end funds. Ensuring the fund can operate effectively post-conversion to meet Regulated Investment Company (RIC) qualification and distribution requirements is critical. Private funds face fewer tax constraints and different considerations, making the conversion process potentially challenging.

4. Structural Decisions

Deciding whether to create your own trust and board or partner with an existing service provider) depends on several factors, including your experience and available resources. Creating your own trust allows more control but requires significant effort at the onset. From governance structures to choosing service providers, ensuring you have the right team in place should be a high priority. Partnering might be more appropriate for those with less experience in managing registered investment companies, as it leverages established infrastructure, experience and expertise.

5. Distribution Strategy and Market Understanding

As with most investment products, knowing your target market and having a clear value proposition are essential. Effectively stating the reason, or the “why,” for the interval or tender offer fund is important. The registered funds space demands more interaction with clients, requiring clear communication about fund fees, performance and expectations. Effective marketing and understanding investor liquidity needs are crucial as well.

6. Investor Base Considerations

The decision on whether to convert or start anew may also depend on the existing investor base. If the current investors are primarily family offices and institutions, and the fund can be structured to meet registered fund requirements, conversion may be a viable option. Conversion from a private fund could provide a tax benefit to tax-exempt investors, such as IRA accounts.

7. Partnerships and Preparation

Regardless of the choice, having the right partners and a clear understanding of the market, regulatory environment, and operational demands is vital for success. Preparing thoroughly and setting realistic expectations can help ensure a smoother transition or launch.


These considerations are fundamental in navigating the complex landscape of fund management and aiding in the successful operation of a fund, whether through conversion or launching a new fund.

Contact Jay Laurila, Camille Clemons or a member of your service team to discuss this topic further.

Cohen & Co is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.

About the Authors

Jay Laurila, CPA, MT

Partner, Cohen & Co Advisory, LLC
jlaurila@cohenco.com
414.203.2840

Camille Clemons

Market Leader, Alternative Investments, Cohen & Co Advisory, LLC
cclemons@cohenco.com
312.221.5004

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