Real estate investment structures can be as varied as the assets themselves. The right approach depends on your capital, experience, investor relationships, and long-term goals.
For many general partners (GPs), launching a fund is a natural next step after syndicating deals. But it’s not just a scaled-up version of syndication. Funds require a different operational model and a deeper level of investor trust.
This guide breaks down the key differences between syndications and funds, explains why many GPs switch, and outlines what to consider before starting your own fund.
Key differences between syndications and funds
While both structures pool investor capital, they differ in how deals are raised, managed, and reported.
Deal-by-deal vs. pooled capital
Syndications are structured one deal at a time. The GP identifies a property, builds the business case, and then raises capital specifically for that opportunity. Limited partners (LPs) evaluate the asset before investing and can opt in or out of any deal as they please. With every new deal, teams must raise capital from scratch.
On the other hand, funds raise capital upfront to invest in multiple properties over time. LPs make one commitment, typically without details of the specific assets – since the properties are mostly not identified at the time of fundraising.. That means greater diversification but also requires more trust in the GP.
Remember: people who invest in syndications are investing in projects. People who invest in funds are investing in people.
Reporting and complexity
Syndications are relatively simple. They require financial updates and distributions associated with a single asset. Funds involve multiple deals under one umbrella, so LPs expect more detailed reporting around fund performance, cash flow, and how individual deals are managed.
Funds also introduce:
- Equalization mechanics to ensure fair treatment for early vs. late investors.
- More complex waterfall structures to define how profits are distributed across a number of deals.
- Ongoing management fees to support operations.
Fees and operational scale
Syndications rarely charge management fees. That can limit a GP’s ability to grow. Funds do, providing GPs with recurring income to invest in better systems, talent, and a consistent deal pipeline. For many GPs, this steady income stream fuels their growth.
That said, syndications can be more profitable on their own. Because each deal is separate, a strong return from one project isn’t lessened by poor performance in others. In a fund, all deals are netted, so profits from a winning investment must be used to pay off losses from a bad bet.
Why GPs shift from syndications to funds
Many GPs start with syndications, but as trust and track record grow, a fund is often the next step.
Trust built through syndications makes a fund possible
Syndications are often the starting point for emerging managers. They help GPs build credibility by sourcing deals, communicating effectively, and delivering strong returns. Over time, this consistency develops the kind of investor trust that makes raising a fund possible.
In essence, you graduate from syndicating to a fund when investors are willing to write you a blank check because they believe in you, not just the deals you find.
Funds unlock scale and predictability
Raising a fund gives GPs more control over timing, deal flow, and growth. Instead of fundraising under pressure, you have committed capital in place. That means quicker execution, reduced risk of losing deals, and increased flexibility to concentrate on strategy.
Funds also come with:
- Capital certainty. You can move quickly, knowing the capital is already there.
- Steady management fees to support hiring, tools, and infrastructure.
- Simplified LP experience. Investors gain diversified exposure without vetting every deal.
But again, it only works if the trust is there. Without that foundation, raising a fund can be an uphill battle.
Syndications can still make sense
Not every GP wants to pursue a fund. Some stick with syndications, even as they grow, thanks to their simplicity and flexibility. This is especially true for those who want to avoid the administrative burden of fund management.
There’s no one-size-fits-all answer. The right move depends on your investor relationships, goals, and ability to manage a more layered process.
What to consider before launching a fund
Moving from syndications to a fund means taking on more responsibility and a longer horizon.
Expect a longer, more structured lifecycle
Unlike syndications, funds aren’t a quick sprint. Their lifecycle includes:
- Fundraising period: Capital is committed and documents are finalized.
- Investment period: The fund actively buys and manages properties.
- Harvest period: Assets are sold and profits are distributed to investors.
This process can last several years, and investor communication must adapt at each stage. Managing cash flow throughout the fund’s life also demands discipline and proactive planning.
Your LPs may need more education
Not every investor is familiar with how funds work. You may need to educate LPs on:
- Blind-pool investing, where capital is committed without knowing specific assets.
- Equalization mechanics, to ensure fairness among investors.
- More complex waterfall structures, which outline how profits are split and losses recouped.
Many LPs familiar with syndications may also question management fees. It’s important to clearly explain how these fees support the fund’s long-term success.
Distribution waterfalls must be clearly defined
Before launching, you’ll need to create a distribution waterfall that details how profits are divided between you and your investors. Most waterfalls include a return of capital, a preferred return, and then a split of remaining profits (paying the “promote” or “carried interest” to the GP). The structure should be easy for LPs to follow and built to align your incentives with theirs.
Now, in a syndication you’ll also have a waterfall. But there, because you’re only dealing with a single asset, you don’t have to address how to net losses from any “bad” deals against profits from good ones. If you’re new to building this more nuanced type of waterfall – which may take lots of different forms -, it’s worth bringing in an expert. You should involve your legal and financial partners early to ensure everything is clear, fair, and fundable.
Reporting and infrastructure must scale with you
Funds require deeper reporting and tighter back-office infrastructure. Be prepared to handle:
- Quarterly and annual investor reports.
- Financial statements across multiple assets.
- Tax documentation.
- Capital call notices and distribution tracking.
If your team isn’t equipped to manage this, consider hiring or outsourcing support before you launch.
The bottom line
Launching a fund is a strategic decision, not a rite of passage. You may be ready to raise a fund if you’ve built strong investor relationships, executed well, and feel limited by the deal-by-deal model.
