Setting up of an investment limited partnership

[Edward.g]

Hi,

I am looking to set up a limited partnership to manage some money for family and friends, amount below 300k. The focus of the fund is to long equities, bonds and options. After doing research online, it seems that there is a need to obtain a Capital Market Services License from the MAS. However, the granting of such license seem to have conditions which are not easy to fulfill. 

Are there any ways to circumvent/ways to start a partnership at a minimum cost? Or would an offshore structure with less restrictions be more appropriate?

I understand that a corporate services or law firm would have the best answer for me but would like to get some heads up from buddies with experience here first.

Thank you so much for your help!

[Dividend Warrior]

Set up a 'family office', like George Soros.

[CityFarmer]

How about a private limited company, as an investment holding company? The maximum number of shareholders are 50, IIRC.

[opmi]

Just set up respective joint accounts with each family or friend.

[Jacmar]

Just set up respective joint accounts with each family or friend.

Firstly you must have the qualifications and then a licence before you can do this. if it is between family members and they don't go to MAS to file a complaint, then nobody knows you are practising illegally. However if with friends and they want to claim money from the losses you made and you refuse they can go and complaint to MAS and you will be in trouble.

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How about a private limited company, as an investment holding company? The maximum number of shareholders are 50, IIRC.

You need qualifications and licence too. setting up a company is easy but to practice investment, financial advise and taking in money is a whole lot different.

[opmi]

Ya. Best is to manage own money. Little bit also can.

Better than see clients' face. Make money no thank you. Lose money like owe them money.

[Edward.g]

Thanks for the responses. I have been managing the money for about 4 years, family and that of my own. However, there are a couple of friends and family who potentially wants in. Thus, while in the past, I could manage through a personal brokerage account, with a greater number of people, especially among friends, it would be best to draft out a partnership agreement, to prevent disputes. It will eventually be a full time job in the future and having that proper structure would also serve as a good show of track record for attracting future funds.

A limited partnership would be the best structure as the profits are taxed according to personal income tax levels rather than corporate taxes which are generally higher. Pte Ltd also has the disadvantage of having higher setup costs, more regulatory hoops to jump through I suspect. However, I think the licensing should probably be the same regardless of the corporate structure?

I have a capital markets financial advisory license for corporate finance (CMFAS 4A). Pretty confused with the licensing issue as the MAS website seems to say a capital markets services license is needed for the corporation instead.

Anybody has got direct experience in this matter? Would a family office set up circumvent the issue?

[CityFarmer]

How about a private limited company, as an investment holding company? The maximum number of shareholders are 50, IIRC.

You need qualifications and licence too. setting up a company is easy but to practice investment, financial advise and taking in money is a whole lot different.

Well, if the setup is private limited, with investors as initial shareholders, and taking-in new money as new capital injection. It is a hassle to withdraw the capital, but since it is for families members and friends, arrangement can be worked out.

It is just an idea, no serious investigation has been done so far. All comments are welcome

[mobo]

I suggest you give up this impractical notion unless you can find some serious money within a short time frame.

All the associated corporate overhead costs, tax expenses and legal implications resulting from whichever form you choose to set up this 300k "fund" will wipe out whatever you can make out of it.

As a fund management business model, it is not feasible generally if you cannot secure a committed capital of at least $20 million. Some startups start off with a few million and make it a goal to ramp up significantly in a few years to recoup earlier losses.

If you are doing it out of alturistic reasons and just want to help your friends and family, it is much cleaner and more efficient to have them maintain their 50-100k accounts seperately in their name and share with you their holdings so that you can advise them on any investment actions.

Also do take note investment performance tracking is a far more complicated thing to do on a professional level than just using elementary XIRRs or X divide by Y formulae in excel. Your unit pricing mechanism and valuation modelling must be able to withstand audit and legal scrutiny.

[grubb]

If you are doing it out of alturistic reasons and just want to help your friends and family, it is much cleaner and more efficient to have them maintain their 50-100k accounts seperately in their name and share with you their holdings so that you can advise them on any investment actions.

Also to elaborate, if you are not a licensed financial advisor, you cannot tell people what to buy/sell. if anything go wrong they can lodge a complaint. Of course the easy way out is add an disclaimer on whatever you say -> "this is not an inducement to buy/sell etc"