A rolling fund is a type of private investment vehicle that allows fund managers—often venture capitalists or syndicators—to raise capital on a recurring basis (typically quarterly), rather than through a single, one-time fundraise. This structure gained popularity through platforms like AngelList and offers flexibility for both managers and investors.
Key Features
- Capital is raised periodically, such as quarterly or monthly.
- Each new investment period is contained in a separate series or sub-fund (such as a single purpose vehicle [SPV]) under a master fund structure.
- Investors commit to a fixed amount for each period, usually for several periods in advance.
- Capital is deployed on a rolling basis rather than waiting for the entire fund to be raised.
- Investors are typically only exposed to the investments made by the specific series to which they subscribed.
- Investors can opt in or out of future series depending on the subscription agreement.
Example Structure
Let’s say a fund manager aims to raise $1 million each quarter:
- Quarter 1: Fund Series Q1 is formed and accepts $1M from Investors A, B, and C
- Quarter 2: Fund Series Q2 is formed and accepts $1M from Investors D, E, and F
Each series can make its own investments or co-invest through a master fund. Investors in each series generally have exposure only to the deals made during their subscribed period.
Legal and Regulatory Notes
- Often structured as a Delaware or Wyoming series LLC using our SeriesFlex™ model, or other master-feeder structure
- Typically offered under Regulation D, either Rule 506(b) or Rule 506(c)
- In a SeriesFlex™ Fund, each offering period is a new issuance of securities, so Form D and Blue Sky filings are required for each series
- If non-accredited investors are allowed under Regulation D, Rule 506(b), Rule 502(b) auditing requirements will apply (see article “Do You Need Audited Financials?”)
Benefits
- No need for a large capital raise upfront
- Allows ongoing investor onboarding
- Better alignment with investors’ liquidity and interest cycles
- Faster time-to-deploy capital for dealmakers
- More flexible capital formation, especially for smaller investors
Drawbacks
- Administrative complexity due to multiple series needing separate accounting, tracking, and reporting
- Regular capital raises may trigger earlier audit or filing requirements, especially when including non-accredited investors
- Investors may have limited exposure if they miss subscribing to certain quarters
