In recent years, private label investment funds have gained popularity among ultra-high-net-worth individuals (UHNWIs) and their family offices.
These funds could be structured as RAIFs, SICAVs, SIFs, ICAVs, or similar depending on jurisdiction and they invest according to the core investor’s needs and long-term goals. Usually, private label funds have a lighter regulatory regime compared to more complex fund structures such as UCITS.
They are bespoke funds that combine the sophistication of institutional structures with the personal touch of a family’s unique identity and strategy.
Why Set Up a Private Label Fund?
1. Tailored Investment Strategy
A private label fund can reflect a family’s unique investment philosophy. It may include traditional assets like equities, bonds, real estate, and private equity. However, it also allows holding assets such as fine art, precious metals, cryptocurrencies, venture capital, and digital real estate, which are typically harder to access through standard funds.
2. Institutional-Grade Infrastructure
Through private label funds, UHNWIs gain access to the same professional infrastructure used by major institutions (fund managers, custodians, administrators). This means better transparency, governance, risk management, lower fees and protection, which are essential for professional management of large portfolios.
3. Cost Efficiency at Scale
While setup and administration costs exist, UHNWIs with portfolios of €30M or more usually find these structures more cost efficient than maintaining multiple segregated individual accounts. In addition, consolidation brings economies of scale in custody, trading, reporting, and compliance.
4. Control with Flexibility
UHNWIs are always concerned about possessing sufficient level of control over their investments. Private label funds allow families to maintain strategic control over critical matters (eg investment restrictions, manager selection, etc.) while outsourcing fund operations. In addition, the fund structure has embedded control mechanisms aimed at investor protection. The fund’s depositary and administrator exercise independent control and monitoring over the actions of the fund manager to make sure he strictly complies with the fund’s prospectus and investment declaration.
5. Privacy and Protection
Another important area of concern for wealthy families is maintaining privacy. Unlike direct ownership, assets held in the fund are shielded from public visibility. The fund’s assets are registered under the fund’s name and safeguarded by custodians. This adds a layer of confidentiality and helps ring-fencing the fund’s assets from the family’s other business risks.
6. Tax and Regulatory Benefits
With the right domicile (such as Luxembourg, Malta, Cyprus, or Cayman Islands) private label funds can benefit from favorable tax treatments, double tax treaties, and efficient estate planning. In particular, for UK resident investors under certain conditions such funds are considered “offshore funds” that enjoy significant tax benefits in the UK. They also allow to consolidate reporting across multiple assets and geographies, reducing complexity
7. Succession Planning Made Simple
Instead of passing down directly owned assets which is often complicated, heirs can inherit shares of the fund. This provides continuity, governance, and clarity for future generations, while also embedding family constitutions and governance rules directly or indirectly (eg through trusts or private foundations) into the fund structure.
8. Branding and Legacy
Beyond performance, many families see their fund as an extension of their name and values. A private label fund reinforces prestige and reputation within financial and philanthropic circles and serves as a legacy vehicle that can be passed down to future generations.
9. Attracting Partners and Retention of Key Family Office Employees
Having a regulated fund, it becomes easier to attract deal originators, asset managers, and banks. This improves access to exclusive opportunities and enhances negotiating power. These structures can also attract co-investors (family, friends, business partners) under a regulated and transparent framework.
One of the challenges for family offices is key employees’ retention. Having a fund structure, allows family offices to offer an institutional career path to their employees, which could be an important factor in their retention.
Some examples of successful private label fund structures include:
- A family office establishing a multi-strategy RAIF to pool diverse investments.
- Consolidating liquid and illiquid assets into one umbrella fund vehicle for a UHNWI family.
- A principal inviting trusted co-investors to select investment opportunities under a regulated fund structure.
- Families prioritizing succession and wealth transfer to the younger generation.
- A single family office granted its key employees profit participation in the fund’s performance through issue of special class of shares in the fund.
Many wealthy families are utilizing private label funds which offer all the above benefits including control, prestige, efficiency, and discretion.
Leon MFO Investments Ltd being a regulated AIFM, can guide you through the process of establishing and managing your private label fund. We have extensive expertise in managing bespoke funds which we combine with a network of reputable service providers while offering high-quality client service and customized solutions.
| Demetris Nicolaou, CFA Executive Director, Head of Risk Management LEON MFO INVESTMENTS LTD |
| T: +357 25 268 120, F: +357 25 260 095 M: +357 99 662 100, E: [email protected] |
| A: Nobel Centre, Spyrou Kyprianou Ave. 47, Office 202, Mesa Geitonia 4003, Limassol, Cyprus |
| W: www.leoninvestments.com.cy |