Fund formation and first-time fund managers
What is a rolling fund and how does it work?
Short answer
A rolling fund is a structure where investors subscribe in recurring periods, usually each quarter, instead of everyone committing at one final close. The manager can keep raising and investing over time. Each period's capital is typically tracked as its own pool. It is a tool, not a shortcut, and the details belong with securities counsel.
How the quarterly cycle works
Investors in a rolling fund commit for a set period, often one quarter at a time, and that commitment can renew. The manager keeps raising and investing instead of waiting for one big final close. Each quarter's capital generally forms its own pool. That means investors who joined at different times hold different slices of the portfolio.
Most of these funds are private, and many sponsors talk to a securities attorney about how the fund is set up, how it can be marketed and who can invest before they start raising.
Why a new manager might want an open raise
The traditional path is slow. You announce a fund, collect commitments, hold a first close, then chase a final close. Some managers sit in that process for years. A rolling structure spreads the raise across time, so a manager can start with a small base and add investors each quarter.
That fits something I say often. Do not make your life harder than it needs to be. Start with a size you can actually fill, then step up.
This clip covers fund size mistakes new managers make, including why a first fund should start small and step up.
Summary and key takeaways from this video
"People like to see momentum. They'd rather see you fill a smaller fund than another fund, and another fund, and another fund, and see how those different vintages performed over time."
A rolling fund is built around that idea. Each quarter is a new vintage, and investors can watch how earlier periods are doing before they add more.
Where I would slow down
The structure does not fix a weak pitch or a thin track record. It only changes how the money comes in. A few things I would check first:
- Do you have a clear niche and a track record or deal flow investors can see?
- Can you send professional updates every quarter, since investors will judge each period?
- Do you have real investor relationships, not just a plan to find them?
- Have you talked with a securities attorney about how to set up the fund and raise for it?
I also see managers leave a fund open for years and call it Fund One. I have said that you may never get it fully raised. A rolling structure can ease that problem, but only if investors keep seeing progress. Without progress, an open raise just looks like an unfinished one.
I would also not start with a huge target. In my experience, five or ten million is a sensible first fund for many managers. Then you can move to twenty or thirty million, then to fifty or seventy. If you can open at a much larger size, that can work too, but many managers cannot.
What I have said on this at our events
If you run a rolling fund, I would not treat it as the holy grail. I encourage managers who start a fund to also do direct investments or allow co-investments, so they are not hamstrung by the structure. A fund is one tool, and some of your best investors may prefer to back a single deal. Remember too that people like to see momentum. They would rather watch you fill a smaller fund and see how those investments performed over time than see one new vehicle announced after another. Show a clean record of what each quarter did.
"And I would just encourage those who do start a fund to also do direct investments or allow co-investments just so you're not hamstrung by thinking that the fund is the holy grail. And if you don't like funds, then we're not going to work with you because we're all founders and entrepreneurs here in the room mostly."
"People like to see momentum. They'd rather see you fill a smaller fund than another fund, and another fund, and another fund, and see how those different vintages performed over time."
From the source
- I suggest a first fund of around five or ten million dollars, then twenty to thirty million, then fifty to seventy million.
- A Fund One left open for five years while trying to raise 200 million may never get fully raised.
- Many investors like to see several smaller funds filled in a row so they can compare how different vintages performed over time.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: Capital Raising Mistakes to Avoid | Ep 16. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around fund structure choices, marketing and solicitation rules and investor eligibility rules. Do not use AI to write your own legal agreements.
What to do next
- Write down the size you can realistically fill in your first year.
- List the investors you already have trust with.
- Ask securities counsel whether a rolling or a traditional fund fits you.
- Prepare a quarterly update template before you launch.
- Decide your niche and one-liner so each quarter's raise has a clear message.
More questions on this
Is a rolling fund the same as an evergreen fund?
They are similar but not identical. Both stay open to new capital over time. A rolling fund usually works in set periods like quarters, and each period is tracked separately.
Can I advertise a rolling fund publicly?
Whether and how a fund can be marketed publicly depends on how it is set up, so many sponsors talk to a securities attorney about this before they advertise.
Does a rolling fund make raising capital easier?
It can lower the barrier to starting because you do not need one large close. You still need trust, a clear niche and a professional presentation to win investors.
Related questions
- How do I launch a hedge fund with small starting capital?Start small and raise from the people who already know you.
- How do I launch a venture fund with no track record?You start by borrowing credibility, because you cannot create a track record overnight.
- What is a side car fund and when is it used?A side car fund is a separate vehicle that invests next to a main fund, usually in a single deal.
- What management fee and carry should a new fund charge?There is no single right number.
Work through it with the ready to raise checklist. See all fund formation and first-time fund managers resources.