Interview | Fund Formation 101: The Graphics-First Guide Is Here

In a market where capital is becoming more selective, structures are under greater scrutiny, and institutional expectations continue to rise, launching a fund is no longer just a growth strategy—it’s a structural decision that can define the future of a lending platform.

At the same time, many private lenders are asking the same question: Is it time to build a fund? And if so, how do you do it the right way?

To address this, Kevin Kim, Partner at Fortra Law, has released Fund Formation 101: Structuring a Fund for Success—a practical, graphics-first guide designed to simplify one of the most complex transitions in private lending.

We sat down with Kevin to understand why this guide comes now, what lenders are getting wrong, and what actually matters when building a fund that works long term.

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The Interview

Uriel Fleicher: Kevin, let’s start with the obvious question—why this guide, and why now?

Kevin Kim: Great question. First, there’s a lot of bad information about fund formation out there by inexperienced, non-experts – and we felt the need to continue our push for more education that is industry specific and tactically minded. Second, I firmly believe in the private lender’s business blueprint should include a balance sheet strategy. And naturally, that leads many lenders to consider launching a fund.

The problem is—they’re making that decision without fully understanding what a fund actually is, structurally and operationally. Or they are receiving guidance from so-called experts that do not have the current specific expertise or precision in this highly nuanced industry. So the goal of this guide was to create something practical, something that simplifies the core decisions and avoids common mistakes.

Uriel: You mention something in the guide that I think is key—you say a fund is not a note program. That confusion seems more common than people realize.

Kevin: Exactly. And it’s one of the biggest misconceptions.

A fund is a portfolio vehicle where investors buy equity interests, typically structured through an LP/GP model—not a product where you’re issuing notes or debt instruments to investors.

Both are considered securities offerings – but the key distinction is that a fund puts you in a better position to obtain a warehouse line of credit and allows the fund to share in profits re: loan sales, REO profits, and so on. Securities offerings do present meaningful concerns regarding compliance, strategy and best practice – so its important you take a precision approach.

Uriel : So when someone comes to you saying, “I want to start a fund,” is that actually the right starting point?

Kevin: Honestly? Not always. A fund should solve a capital problem, not create an operational one. Your business needs to sustain it. So if you don’t have consistent deal flow or you are unable to raise the money, it’s not the right fit for you. Furhter, you should be prepared to take on a new business line. if you’re not ready to handle the added burdens of investor reporting, investor relations, accounting, compliance, and ongoing communication—you’re probably not ready yet.

Uriel: That’s interesting—because externally, having a fund is often seen as a sign of maturity or growth.

Kevin: It is—but only when it’s built correctly. There’s a tendency to think: “If I build a fund, I’ll unlock capital.” The reality is: You unlock capital when you build trust, structure, and operational discipline. A fund amplifies what you already are. If your foundation is weak, it will expose that very quickly.

On Structure: Decisions That Define Everything

Uriel: Let’s talk structure. One of the things I liked about the guide is how clearly you break down choices like open-ended vs. closed-ended funds.

Kevin: That’s one of the most important decisions. In credit-focused strategies, open-ended funds are common because they align with ongoing lending activity. In real estate, closed-ended funds tend to make more sense because of longer hold periods and it addresses the ever changing net asset value of the portfolio. But more importantly—it’s not about preference, it’s about alignment with the underlying assets. This doesn’t mean closed ended funds are not a fit for lenders. We find that many lenders who do longer term loans or higher risk loans benefit for closed end funds because they are less concerned regarding liquidity fights.

Uriel: And what happens when that alignment is off?

Kevin: That’s when you run into problems—especially around liquidity. For example, if you offer redemption flexibility but your assets are illiquid, you create pressure on the fund. That’s where you start seeing things like gates, redemption restrictions, or investor friction.

Compliance & Capital Raising Reality

Uriel: Another key section is around securities exemptions. From your experience, is this where most lenders get it wrong?

Kevin: Yes and often very early. The exemption you choose depends on two things:

1. Who your investors are
2. Whether you plan to market publicly

Most emerging managers end up using Regulation D structures, but even within that, the difference between 506(b) and 506(c) has real implications on how you raise capital.

Uriel: So this isn’t just a legal decision—it’s a business strategy decision.

Kevin: Exactly. It directly impacts your growth model.

The Mistakes That Hurt the Most

Uriel: Let’s talk about mistakes—because that’s where the real value is. What are the most common issues you’re seeing?

Kevin: Two big ones. First: lack of future-proofing. Managers build a structure that works for today but doesn’t allow them to evolve new asset types, new geographies, leverage strategies.  Second: weak operational processes. Poor reporting, delayed financials, lack of transparency. These aren’t just operational issues they become credibility issues.

Uriel: There’s a line in the guide that stood out to me: “Many fund problems are planning and process problems.”

Kevin: That’s exactly right. People assume the complexity is legal. It’s not. The real complexity is operational—reporting, communication, execution. This becomes a lot easier when you have a strong guide that is a precision expert.

Final Thoughts: What Should Lenders Do Next?

Uriel: For lenders reading this who are considering launching a fund—what’s the first step?

Kevin: Start by understanding what you’re building. Not just the structure but the responsibility. A fund is a long-term commitment to your investors. And if you do it right, it becomes one of the most powerful tools to scale your platform.

Uriel: Kevin, this was incredibly insightful—and I think what stands out is that this guide doesn’t just explain how to build a fund, it explains how to think about building one.

For those looking to go deeper, you can download the full guide here:

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