Investment Company

Lovelyjaws

I have been thinking for years about setting up an investment company where I would accept deposits from investors and invest the deposits in various industries in the hope of making a return that exceeds what i would pay on the deposits.Anyone involved in this type of business?Would i require some type of banking license?

maxwell smart

There must be plenty of regulation in this area, just ask Bernie Madoff, he might know? (Actually, best not):D

antoinolachtnai

Yes, you need an IFSRA licence to do this, in whatever form.

You cannot take a deposit and play it on the stock market (or 'invest' it or whatever you want to call it). This is simply not allowed. The reason is that as a class, stocks and shares are too risky to put deposits into. You would not be able to guarantee that you would be able to get the people their money back.

You could run a sort of investment fund where you invest money on people's behalf. But the people would need to understand that their entire investment was at risk.

Lovelyjaws

Well the investments would be diversified obviously to reduce risk.Would it be easier if i issued an investment bond rather than accepting a deposit? I have a financial backer who is willing to guarantee investor funds.

antoinolachtnai

Diversifying the fund won't give you much or any protection against cyclical downturns.

Why don't you just invest your financial backer's money, and forget about all the rigmarole of accepting outside investors?

Lovelyjaws

I am fully aware of the effects of cyclical downturns and diversification and have been investing for a number of years. My backers guarantee would purely be a last resort and that's why I would seek investors funds to invest first.Just looking for advice on how this may be set up

antoinolachtnai

If you want to guarantee the investors' money while investing in the stock market, your backer's guarantee would really need to be in the form of cash, or something like cash, sitting in the bank. It is effectively his money you are investing, not the investors'.

You can structure a capital-guaranteed investment. Essentially this is done by putting almost all of the investors' money on deposit and making highly leveraged investments with whatever is left.

However, after the ACC solidworld debacle, I don't think this type of product will be sold very extensively. There are a lot of hazards with selling these.

What sort of size of fund did you have in mind?

cerebus

If you think you know enough high net worth individuals or people who invest institutional money, maybe think about starting a hedge fund or a private equity fund... dealing with "sophisticated investors" like these can help remove some of the regulatory issues.