The Best Ever CRE Show JF 4015: Investor Comms, Liquidity Terms and Customizable Funds ft. Gene Trowbridge
Sep 1, 2025
Gene Trowbridge, founding partner at Trowbridge Nieh LLP and a go-to attorney in real estate syndication, dives into the complexities of capital raising with fund-of-funds structures. He explains the differences between 506C and 506B regulations and highlights the importance of transparency and disclosure. Trowbridge discusses challenges in co-GP compensation and the necessity of establishing trust between sponsors and investors. Finally, he introduces the innovative concept of Customizable Funds, offering tailored investment options for savvy investors.
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How Fund-Of-Funds Circumvents Broker Rules
- Fund-of-funds solves the broker-dealer compensation problem by shifting compensation into the fund's own vehicle instead of the sponsor paying transaction-based fees.
- This structure legally separates the capital-raiser's compensation from the sponsor and avoids broker-dealer issues when done correctly.
Set Preferred Share Classes Ahead Of Time
- Establish preferred share classes or pre-negotiated side letters before raising capital for a sponsor's deal.
- Do this ahead of time so sponsors can set different economics (e.g., better waterfalls) for larger incoming SPVs.
Decade-Long Successful Fund-Of-Funds Example
- Gene describes a fund-of-funds that pooled many small investors to meet $1M minimums across five funds and succeeded for a decade.
- The model worked repeatedly until the managers retired, showing real-world viability.