In order to prevent fund investors to claim rights to the fund’s residual earnings or “profits, we created two classes of shares, with one class offering ownership rights to profits generated from investment assets, and the second class offering residual income that would otherwise go to the external and separately owned ‘management company’.

By adopting a SPC type structure to a limited liability company, whereby instead of separate portfolios under an SPC, we created two separate share classes with two separate beneficial interests. This way a single entity was able to divide assets among two different series of beneficial interests and to give each series its own distinct creditors and its own distinct legal personhood.

We formed an investment advisory entity, which acts as the fund’s investment adviser (also called the investment manager or management company). The fund entered into an investment advisory agreement (or management agreement or similar services agreement) with the investment manager.

Ownership rights and structure

In this legal structure, the fund manager usually owns the voting, non-participating management class of shares. Control and decision-making of the entity fall on the board of directors, while investment decisions are usually made by the fund manager.

Investors obtain non-voting, participating class of shares which are issued each time new investors are onboarded. 

The fund pays management and performance fees to the fund manager while distributing dividends to participating shareholders.