This year marked our fourth year sponsoring Camp Hustle, and we sat down with Eric Bahn, General Partner at Hustle Fund, for a fireside chat: a practical breakdown of what fund operations involves, what most first-time managers get wrong, and what separates the funds that scale from the ones that get buried in their own back office.
Here is what we covered.
Running a fund means running three tracks at once. There is the investment track, sourcing, diligence, deploying capital. There is the fundraising track, building LP relationships and closing commitments. And then there is the operational track, the books, the reporting, the capital movement, the entity management. Most managers think about that third track after the fact. The ones who build durable funds think about it before they close a single dollar.
Operations comes down to five core areas. Entity management: your fund, GP, and management company are three separate legal entities, each with its own books, bank accounts, operating agreement, and tax obligations. Fund accounting and bookkeeping: every capital contribution, investment, fee, and expense tracked and reconciled, the source of truth for everything else. Capital calls and distributions: the mechanics of moving money between your fund and your LPs, both of which require precise calculations and clean execution. Investor reporting: the quarterly and annual financial statements and capital account statements that keep LPs informed between closes. And audit and tax coordination: annual audits and K-1s that need to be planned for well before year-end, not treated as a December surprise.
Your back office does not generate returns. But a broken back office can absolutely destroy them.
For most emerging managers, outsourcing fund administration is the right call. In-house operations are a fixed cost with headcount, systems, and benefits. An outsourced admin scales with your AUM and fund count. Beyond the economics, institutional LPs increasingly prefer independent third-party reporting, especially on a first fund. It signals checks and balances.
When you are evaluating fund admins, a few things matter more than what is on the website. You want real experience with your fund type specifically, because VC, PE, and other asset classes have meaningfully different accounting needs. You want a dedicated team, not a ticket queue, someone you can actually reach when you are moving fast on a close. Ask to see the LP portal before you sign, because your investors interact with that portal and the quality of that experience reflects on you. A good admin also does not just hand off at year-end. They coordinate actively with your auditor and tax advisor throughout the process.
One area that almost always gets underestimated: the management company. It has its own books, payroll, expenses, and tax return. If you are paying yourself or any staff, those transactions need to flow through the management company correctly. Getting this right from day one prevents a significant amount of cost and confusion later.
The operational decisions you make at launch set the trajectory for the entire fund. Most mistakes are not made during operations, they are made during setup.
Before a single dollar moves, all three entities need to be formed with separate operating agreements, EINs, and bank accounts, and your accounting structure needs to be in place before the first capital contribution comes in. Your fund administrator should be onboarded at least two weeks before first close. Your legal counsel, auditor, and tax advisor all need to be engaged early, because these relationships take time to ramp and the managers who start them late are always scrambling.
On the LP side, your subscription and onboarding process needs to be defined and tested, your KYC and AML procedures confirmed, and your investor portal live for day one. Insurance needs to be in place before you need it and your tech stack needs to be selected before you are too busy to evaluate it properly.
Fund operations is not a one-time setup. Once you understand the recurring cadence, it stops feeling like a fire drill and starts feeling like a system.
Bookkeeping, investment tracking, and bank reconciliations are ongoing. Every capital call means calculating each LP's amount per the LPA, sending notices, tracking wire receipts, and reconciling to the bank. Every distribution means running the waterfall calculation, preparing notices, and coordinating wires. Quarterly, that means financial statements and capital account statements for each LP. Year-end means annual financials, audit kick-off, and valuation updates. And Q1 of the following year means audit completion and K-1 distribution to all LPs.
The managers who treat this as a system are always ahead of it. The ones who treat it as a series of emergencies never are.
Messy books from the start create compounding problems: bad reports, bad audits, bad K-1s, and no shortcut to fixing them retroactively. Neglecting the management company is close behind. It gets overlooked until something breaks, usually at the worst possible moment. Letting LP reporting slip is another common one: the busier you are deploying capital, the more important it is that reports go out on time, because late reporting is exactly when LPs start asking questions about how the fund is run.
Treating audit as a year-end scramble costs real money. Organized records throughout the year mean faster, cheaper audits, and the cost of cleaning up in Q4 is always higher than staying current. Mixing fund and firm expenses, what gets charged to the fund versus the management company, is defined in your LPA, and getting it wrong is one of the most common audit findings. And under-resourcing operations early is the mistake that tends to surface at the worst possible moment: during a close, an audit, or a distribution.
On the LP side, operational quality is evaluated alongside returns. Accuracy, clarity, consistency, clean audited financials delivered on time, and K-1s on schedule. Late K-1s are one of the most common LP complaints we hear, and it is an entirely avoidable one.
Every year at Camp Hustle, we leave the room more energized about what emerging managers are building. The conversations reinforce what we see every day: getting operations right from the start is one of the highest-leverage decisions a fund manager can make. If you're building or rebuilding your fund operations, reach out, we'd love to chat.
Vector AIS provides fund administration services to alternative investment firms, including reporting, workflows, tax and audit coordination, and investor onboarding solutions.
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