For those in syndication discretionary funds, how are you holding capital before deploying?
This is a bit of a logistical question. I have a discretionary fund. Total commitments are $4M+ and have investors ready to wire funds. We have clear criteria on the assets we want to buy but no asset yet. Where are you holding the capital? My ideal scenario is to hold it in liquid treasury accounts where my investors can still collect some yield while we find a deal. Anyone know of any options like this? Would also need to be a platform where I can invest under a LLC and the full amount is insured by SPIC.
Based on previous WSO threads, here are some insights and options for holding capital before deploying it in a discretionary fund:
Liquid Treasury Accounts: Holding capital in liquid treasury accounts is a common strategy. These accounts can provide a yield while maintaining liquidity, which is essential for quick deployment when a suitable asset is identified.
SPIC Insured Platforms: Look for platforms that offer SPIC insurance to ensure the full amount is protected. This is crucial for maintaining investor confidence and safeguarding the capital.
LLC Investment: Ensure that the platform you choose allows investments under an LLC structure. This is important for legal and operational purposes, especially in managing a discretionary fund.
Yield Considerations: While holding capital, it's beneficial to choose options that offer some yield to keep investors satisfied. Treasury accounts are typically a safe bet, but you might also consider other low-risk, liquid investment vehicles that align with your fund's risk tolerance and liquidity needs.
Operational Efficiency: Ensure that the platform you choose is operationally efficient, allowing for easy transfers and management of funds. This will help in maintaining smooth operations and quick deployment when needed.
In summary, your ideal scenario of holding capital in liquid treasury accounts with SPIC insurance and under an LLC structure is feasible. Look for platforms that meet these criteria to ensure both safety and yield for your investors.
Sources: PE Investment Activity Amidst Spiraling Markets, Q&A - Infrastructure PE & IBD, https://www.wallstreetoasis.com/forum/venture-capital/vc-is-a-laughable-shitshow-change-my-mind?customgpt=1, Differences between Co-invest and Secondaries?, Who manages your money?
I don't hold discretionary funds, only raise when I have a deal, but personally I have an account with IBKR and think that could work. You can open accounts in an entity name, you can buy treasuries, and you can get insurance beyond SIPC limit by having them split the funds up amongst various banks. Forgot the threshold. You don't notice it's split and it's immediately available to you. I think their money market even at other banks pays like 4.5% or something right now.
We hold in a community bank money market account (balance over $5mm) and they are paying us 5.5%.
We stick it in the account of the bank most likely to lend us the money :). We use an ICS account at each bank and are getting anywhere from 5.2-5.5% right now.
Nice, so you just put it under the LLC? Not a bad deal at 5% at fully insured.
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