In this interview Bridger Pennington and Lincoln Archibald (co‑founder of Fund Launch Partners) compare the relative difficulty of launching six alternative‑investment fund structures when starting from scratch. They rank the fund types from hardest to easiest, discuss the operational, regulatory, and capital‑raising challenges that drive those rankings, and highlight where the two experts diverge. The conversation covers: (1) Hedge funds – viewed as the most difficult due to open‑ended capital, high compliance (CFTC/NFA), intense competition, and the need to generate returns quickly; (2) Fund‑of‑funds – also very hard because of double‑layer fees, extra regulatory scrutiny, and the need to raise hundreds of millions to be viable; (3) Private equity – hard because it requires substantial infrastructure, larger deal sizes, and deep value‑add capabilities; (4) Venture capital – logistically easier to start but hard to raise capital and differentiate in a crowded market; (5) Real‑estate funds – relatively easier thanks to abundant local assets, many experienced operators, and clearer partnership opportunities; (6) Private credit – considered the easiest (especially small‑scale hard‑money lending) because it involves issuing loans rather than managing assets, offering quicker cash‑flow cycles. Throughout they reference their experience launching funds through FundLaunch, note nuances such as “small” vs “large” private equity/venture, and invite viewers to share their own rankings.
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Welcome back to the channel. Today we're going to be discussing what is the hardest to easiest funds to start if you're going to start over. Today I got a guest with me, Mr. Lincoln Archibald, co-founder of Fund Launch Partners, $30 million GP stakes fund, does a lot of these investments right now. We both help run Fund Launch. We've helped people around the world launch investment funds. So with that, the categories today that we're gonna be talking about are fund of funds, venture capital, hedge funds, real estate funds, private equity funds, and private credit funds. All right, Lincoln, if from that category, what would be the hardest fund to start first in your opinion? And we'll go to easiest.
So first on my list is probably a hedge fund, uh, as the hardest to start and get off the ground. And let me tell you my reasoning why. Yeah. Uh, I mean, hedge funds are open-ended products, and if you have a down year, uh, in your first couple years, I mean, it's very tough to come back from that. It's hard to raise money. Uh, you have a down year, your capital isn't locked up. Investors can withdraw. There's also a lot of competition, you know, in the markets.
It's a zero-sum game. Hedge funds.
Yeah. I mean, you can't just— it's a lot harder to add value. And then compliance and administrative on a hedge fund, it's a lot more intense than other funds, especially if you're like registering with the CFTC or the NFA. Just become— it can become a nightmare real quick.
Yeah.
Yes. Yeah.
So funny enough, I had that as number 2.
Okay.
My hardest was actually, which one I would not start first is fund of funds. I put fund of funds first for a lot of those same reasons. And I put hedge funds second. But fund of funds is this, people think they should just, oh, that sounds easy. I won't manage a fund. I'll just invest into other people's funds. And what happens is fund of funds have an extra layer of compliance. Now you're charging 2 fees.
Yeah.
And so, there's more compliance that you have to do with regulatory bodies. It's way hard to raise for. People think it's easy to raise for because, oh, I'll just, I'll raise a fund that invests into 10 funds. It's way harder to raise for that, especially when you're starting out. And I see a lot of people go down the fallacy of, oh, I'm gonna do that. That's why I put it as first, almost because it, it sounds easy.
Yeah.
Hedge funds sound hard, and so people avoid it. Fund of funds sound easy, but actually are, I would say, equally as hard to execute and do well and to raise for that hedge fund.
Yeah, I don't know. I see, I might disagree. I think like, yes, I think a lot of people think that. I think you're spot on. But really, you just need a reason to win in the space in hedge funds or in a fund of funds. So, like, if you have really good access, like, there's, there's ways that you can create an edge in that space. Yes, a lot of people don't when they start off, but at least in terms of ease of getting off the ground, I don't know, I'd probably be like 4 on my list.
Really?
Okay.
Well, what'd you have for number 2? Your hedge funds was your first. What was number 2?
I think the second hardest to get off the ground is private equity. And the reason being because private equity, you have to have a very tangible value-add lever, right? And so you have to have infrastructure, you have to have team, you have to have depth. You typically need more money to operate private equity transactions. Like, it's like with a— with venture or real estate, you could honestly be a solo GP a lot of times. With private equity, like, That doesn't really happen. You need more infrastructure, you need more depth, and it's hard to get right out of the gate. So I would say that's probably the same.
For your number 3?
Or private equity is number 2?
Private equity is number 2. Yeah, for my number 3, I was between private equity and you can define private equity. Large private equity, 100% what you just said. There's also small or micro private equity, like buying a laundromat or 5 laundromats, which can be way less intense. So, I kind of split between those. I almost have a split decision between, for my number 3, of having venture capital and private equity kind of be interchangeable depending on what you're doing. A small venture capital operation where you're investing into just early-stage startups and helping them or small businesses, I feel like are both the same and easier. Large venture capital and large private equity, I would say private equity is harder than venture capital. So, for my list, I would put, I would actually agree with you. Number 3 for me would be— private equity. I guess that's number 2 for you is private equity.
Yeah.
Number 3 for me is private equity, and then I would put venture capital as my number 4 because the other one is the fallacy around venture capital of I can just, oh yeah, I could just start. I'm gonna pick some startups too. It's back to the same on fund of funds of like, oh, it just sounds easy. I'll just go get into this game.
Well, yeah, like venture is interesting because logistically it's probably the easiest, like in terms of Like, oh, I'm just gonna go angel invest. There's an abundance of opportunities out there, right? But it's really tough to raise for and create differentiation in these.
Why would I? Yeah, why would I invest with you versus there are 100 other guys that are doing it?
There are so many people that want to be venture capitalists, and that's the issue is it's kind of this perceived sexy, you know, industry. And so there's a lot of competition. I mean, if you look back, you know, 20, 30 years, it probably would be, I think, higher up on the list because there was an Appetite for that, but also like DPI has been super low. Returns have been low. Not a lot of paid out capital, and so people are pulling back from the asset class. So yeah, I definitely say it's it's it's up there.
So that's where my thing number three. Yeah, my or your number three is venture capital. Okay, so your first is hedge fund, private equity, now venture capital. See, it's funny for me, private equity I put at number three, but it's inter like. Small private equity is much easier than what you described to venture capital. If someone's like, "Hey, I'm gonna raise a small fund to buy up four car washes or and group them together and start running and operating," I'm like, "Yes, that sounds when we're doing easiest to hardest. That's easier than running a venture capital fund and raising for it because you actually can find a niche and target that niche, which is anyways kind of cool." So I would put my three and four almost interchangeable. So here we are. What was your? So I for number one for me was fund of funds. I had two hedge funds, three and four private equity venture capital depending on. which flavour of private equity venture capital. What's your number 4?
Yeah, I'd probably put fund of funds at number 4 in terms of difficulty to get off the ground. It's just really hard to have an edge. It's really hard to, you know, people, you know, I mean, people know the name, which is good. So retail investors might have an appetite for it, but especially at bigger money, like very difficult.
You know, well, in fund of funds, to make it work, you have to raise a lot of money for the business model. In most cases, you're raising minimum a few hundred million dollars. Yeah, because you're trying to get preferred economics by putting large checks into funds.
Yeah.
And so for a brand new manager to go raise X hundreds of millions of dollars and say you can pick managers very well, I think is just tough.
Yeah.
Yeah.
And I mean, look, I, I think fund of funds, like Again, it's kind of similar, but, you know, 10 years ago there wasn't as much access to alternatives as there is today. And so, but now most of the time, most, you know, financial advisors or whatever, there's an abundance of products on the market. So it's a lot easier to access alternative investments where—
It's like, why do I need this middleman?
Yeah, like, yeah, it is almost a middleman.
Okay, we're now getting to the easier. We've gone hardest to easiest. We got the last 2 here. My second to easiest or second to the one that I would start is real estate funds.
It's the easiest?
It's my second to easiest.
Okay.
So, real estate funds for me, if I'm going to start over and get into a business, there is so much real estate. It's local. Competition is, depending on the market, is less depending on the sizing you're going after real estate. As players get bigger in real estate, they tend to go upstream and it leaves this gap in the market for downstream, which is where you can come and fill that gap. So I see a lot of successful funds launch in real estate. They find good partners. There's actually quite a few comparatively to the other categories, really good real estate operators. Yeah, there's way more good real estate operators than good hedge fund operators to go find and partner with or build a team around. I think real estate would be a great one as my second to easiest to launch.
Yeah. So I— so then your number one would be private Credit.
Yes. Okay.
Yeah. So I had those flipped. So I had private credit as number— as the second easiest, and then real estate as—
So why'd you have that as the easiest?
Well, you know, very similar reasons. I mean, I think that on real estate, there is just— everyone's familiar with it, right? When people think of alternatives, that's where they go most of the time. Like, that's typically people's first step into alts. You know, it's easy to— easier to generate a track record by going and, you know, there's creative financing for it. You know, you can go do— start on single-family or, you know, duplexes and move your way upstream. You can be very creative in the asset class and there's an abundance of it. So, you know, ease of entry.
Yeah.
Yeah.
So I— yeah, it's funny, we keep switching ours, but private credit for me, I made a video about this a few weeks ago. And I'm talking private credit on a small scale. Obviously, large private credit, hard to get into. But I'm talking hard money lending, private money lending, lending on real estate. The reason I put it there, because real estate, you have to go manage the freaking buildings. You have to like work with contractors and delays and problems at real estate. Private credit, like I— and that was my first fund I ever ran, was a debt private credit fund. You just issue loans.
Yeah.
And they, you know, give them a phone call to pay you back in 60 days or 180 days, whatever the timeframe is. And if they don't, you then just go and collect on the collateral. It's an actual— it's very much easier to start your loop to get returns back to investors.
It's quick.
It's very quick. So if I was going to start over, I always like—
Short-term lending. Yeah.
And I'm talking short-term. Maybe I'm picking a subset here.
You are.
I'm picking a subset of private credit.
Yeah. That's where I differentiate. Because if you're doing business lending and these are longer duration loans, then—
Yeah, a lot different.
Yeah. Very different and hard to get into.
It's hard to break into, like large-scale private equity.
Typically a lower return profile, right? A lower return asset. Your fees are compressed. It's harder to have differentiation in the asset class. And typically, you're minimizing for a risk of a default. And so you want to have a lot of positions, right? You need breadth. And in the portfolio typically. And so yeah, that's why I put it as number 2, but still relatively, you know, in the broad scheme of things, probably one I would start. Yeah, the easier ones.
Well, I think you're wrong on your list.
Well, agree to disagree.
All right, y'all, we help people launch funds at FundLaunch. So come to fundlaunch.com. We can check out how to build a fund, how to work on your fund. We help people all around the world do this. Drop your ranking down below. Where did we get it right? Where did we get it wrong? Follow along to stay in the loop and see you in the next one. Bye-bye.
