This Will Replace LLCs

So what's the difference between a single asset fund and a blind pool fund? In this video, we're going to talk through the pros and cons, why I would consider one over the other, and how a lot of people are using both these structures to go raise large amounts of capital. If you're new to this channel, my name is Bridger Pennington. I currently manage about $45 million between 2 funds. I run a company called Fund Launch that have helped 300 people launch their own funds in the last few years. So first off, let's define single asset fund and blind pool fund. Both of these vehicles Are a fund. And if you followed our channel before, you know a fund is just a pool of money that investors— I'll draw over here— investors or limited partners put money into this pool. Fund managers over here, I'll draw them out. Fund managers, they draw from that pool, they go and make investments. Whenever those investments make money, the money flows back to the pool and gets split between the investors and the fund managers. That's called a waterfall distribution. Okay. Pretty simple concept. This is, this is true for hedge funds, private equity funds, venture capital funds, real estate funds. They all are functioning pretty much just like this. This pool is called a limited partnership. This fund manager is under what they call a general partner. And these are limited partners. That's for other videos. But again, this is all just a pool of money. So for definition's sake, what's the difference then between a single asset fund and a blind pool fund? Well, down here with our pool of money with the investments that this pool is making. The big difference is kind of in the name. If they're doing a single asset fund or a SAF, they are buying one asset, a single asset. They are raising a pool of money to buy, you know, 123 Main Street Boulevard, whatever the, you know, the city name is, okay? They are raising money to buy one asset. A blind pool fund is raising money here To buy multiple assets. And it is blind. It's kind of in the name, meaning you don't know what the assets are yet. So for example, over— I'll put it in red right here. A blind pool fund is going to raise $30 million and they're going to go buy 12 real estate properties over the next 24 months. And we do not know what the properties are yet. Okay. That would be what's called a blind pool fund. But if we knew, okay, hey, we're buying 123 Main Street and we're doing one single vehicle together, that would be a single asset fund. Is that kind of making sense, the difference of, you know, these 2? So let's now talk pros and cons of each. Okay. Over here in our beautiful pros and cons page, I drew this myself. Pretty nice. All right. So with a single asset fund versus blind pool fund. So let's first talk pros of single asset funds. Number one, the pro is it's a Single asset, like it's a deal. It's in front of you. Deals are much easier to raise for a blind pool. So I'm going to put capital raise, cha-ching, like way better for a single asset fund versus a con for the blind pool would then be, you know, capital raise is harder. I'm going to put capital raise over here. Second one, pro for single asset fund, much cheaper on legal docs setup, you know, putting it together. And again, a con over here then would be more expensive, much easier with legal expense docs. You know, generally a single asset fund you can do for, you know, 5 $6,000 to $8,000, something like that. A blind pool fund is typically, you know, $25,000 to $45,000. That's your cost difference for setting up these 2 different vehicles. Now let's go pro blind pool fund. Pro blind pool fund is it's much larger typically and more scalable. These are what the big dogs do. They go by and you can have a repeatable process. You don't need to go and every time you find a new deal, you got to go raise and call up investors and dial and, you know, all the stress of getting money in. Once you raise your $50 million, $100 million blind pool fund, that money's there. You just do a capital call. Capital flows in, you go buy the asset. You don't have to be worried every time if you can close or not close when you find good deals. A single asset fund, you know, you're stressing out. You're on a deal-by-deal basis. This one is, you know, a little bit smaller basis over here for single asset funds. A pro would be larger and scalable. Building upon that, with a pro of blind pool fund, you're going to get— it's more repeatable, meaning you can launch fund 2, fund 3. Single asset funds also repeatable. But it's again on a deal-by-deal basis. A lot of times we think of a single asset fund as a stepping stone to eventually one day run a blind pool fund. It's kind of your, maybe your first step, but the ultimate goal isn't to do single asset funds forever. The goal for most is to end up one day running a blind pool fund because there's so much more money over here running a blind pool fund. When you're big, you're doing lots of deals, you can build a robust team, you can build a firm around you and really scale. Single asset funds, it's more deal-by-deal basis, much smaller. Now back to a pro for single asset funds. You can actually go and build a track record much faster. A track record is, you know, your performance on deals. In a blind pool fund, you know, a lot of times these deals take to do a full portfolio, 7, 12, 15 deals. It's going to take 6, 7, 8 years to know if you're correct. And if you're right. In a blind pool fund, depending on your deal size, you could know in a matter of months or even just a year or 2 if you're correct, if you're a smart investor. Does that kind of make sense? In a blind pool venture capital fund, you really don't know for 7 to 10 years if someone's good at venture capital. But in a single asset fund, you might know in maybe 18 months or 12 months if someone's a good venture capitalist, depending on how the deal is structured. So overall summary, both are good. We help people do both at Fund Launch. Single asset funds are awesome for building a track record starting out. They are cheaper, easier to raise capital for and build a track record. If you are ready to scale, a full blind pool fund Much larger, much more scalable, much more money. A few cons here, a little bit harder to raise capital, more expensive, but well worth the cost if you're ready to scale. So both are good options, both are in the same process, and hopefully that helps you answer the question between single asset funds and blind pool funds.