High Fixed Costs

problem1

Due to high fixed costs, fund managers need high FUM to breakeven​

  • Fund managers face high fixed costs associated with operating a fund.
  • These fixed costs mean the funds under management (FUM) required to break even are often out of reach of new managers.
  • With average fund costs meaning breakeven only occurs at FUM of $25m, this presents an existential difficulty for new managers looking to enter the market.
  • Even worse, whilst breakeven is only usually reached around the $25m FUM mark, “square-one” (the point where the manager actually earns a $200k wage), is usually only reached beyond $35m FUM.

Typical fixed costs for a fund manager

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Traditional Break-even Analysis

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FUM
Likely Scenario*
Description

$5M - $25M

Making a loss

Need more FUM to generate a profit.

$25M

Breakeven

Point at which fixed costs equals fees generated.

$35M

Back to square one

Point at which profit is equal $200k, your assumed wage at an existing fund.

> $35M

Better off

Point at which profit is greater than $200k, your assumed wage at an existing fund.

*Notes:

Assuming that your fund makes 15% returns, and charges a management fee of 1.5% of FUM and a performance fee of 25% over a 6% hurdle rate.​

Assuming that your fund has 3 employees: junior earning $65k, a middle manager earning $120k, and a senior manager earning $180k, including all superannuation and on-costs.

How can TIP Trustees help?

TIP Trustees provides all trustee, custodial and admin services for a one third (33%) ownership of the fund manager. In addition, we provide access to the wider TIP Group set of skills and resources, giving you not only lower fixed costs but the network you need to grow your fund faster.

By partnering with TIP Trustees you significantly reduce the required FUM to breakeven… and by leveraging our network you can raise capital faster and unlock better returns.

Team required: traditional

$180k

Senior Employee
team

Make investments, bring in FUM, and handle investor relations.

$125k

Mid-level Employee
team

Conduct compliance work (tax, legal, and audit).​

$65k

Junior
team

Junior to assist the team.​

Team with TIP Trustees

$180k

Senior Employee
team

Make investments, bring in FUM, and handle investor relations.

$50k

Junior
team

Basic personal assistant or intern.​

Our Model - New Break-even

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