Emerging fund managers often face a paradox: they need a track record to attract investors, but they need investors to build a track record. This “chicken or the egg” problem creates a significant barrier to entry, making it difficult for talented managers to launch their own funds—even if they have a solid investment strategy.
A common workaround is to showcase a back-tested strategy in the hopes of convincing investors. However, back-testing is, at best, a weak indicator of future performance. Investors know that historical simulations do not account for real-world execution risks, market impact, and behavioral biases.
Instead of relying on theoretical models, we propose a more concrete method—using Fume to establish a verifiable track record before formally launching a fund.
Here’s how it works:
Start with a small, self-managed investment structure using Fume. The goal is not to raise capital immediately but to generate real, auditable performance data.
To avoid the complexities of collective investment scheme regulations, aspiring fund managers can initially invest their own capital. If you decide to involve others, ensure compliance with local laws.
For example, in Switzerland, a structure with fewer than 20 investors and under 1M CHF in AUM (with no compensation) does not fall under standard fund regulations. Do your own research to comply with local regulations.
Trade as you would in a full-scale fund, refining your strategy in real market conditions. Whether investing on-chain or off-chain, the focus should be on performance and risk management.
Using Fume’s protocol, periodically record your Net Asset Value (NAV) on-chain to ensure transparency and immutability. This creates a tamper-proof performance record that potential investors can verify.
Once you’ve built a meaningful history, get your performance audited by Fume’s audit partners. An officially verified track record carries significantly more weight than back-tested results, increasing investor trust.
By taking this approach, emerging fund managers can:
✅ Establish a real, auditable performance history
✅ Gain credibility with investors before fundraising
✅ Delay expensive fund setup costs until a significant capital commitment is secured
Rather than being stuck in the endless loop of “no track record, no investors,” managers can flip the script and build a track record first. With Fume, fund managers can turn a theoretical strategy into a verifiable success story—giving investors the confidence they need to commit capital.
Get in touch to launch your on-chain investment fund.
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