FirstWave Fund update -- September 23rd
Hi everyone,
This is my first email update since August 17th which you can read here…
https://firstwavefund.substack.com/p/update-on-firstwave-fund-august-17th
There’s been a few developments since the last update, most of which I’ve posted on the investor spreadsheet since the overwhelming majority of you were still paid subscribers.
Speaking of the investment service, it’s been shut down as of Friday, September 19th. Over the next 1-2 weeks I’ll be processing all the prorated refunds. It’s a big project given the size of my subscriber base so I need Substack’s engineering team to help out.
We’re hoping to start client onboarding for FirstWave over the next few weeks.
This week we’re uploading everyone’s contact info into the Pinnakl CRM which we’ll use to help manage our investor relationships including notes, newsletters and other updates/communications.
We’re going to use http://subscribeplatform.com/ to help with the client onboarding process. This should make things easier and faster for everyone.
I’m not sure if the investor docs (LPA, PPM) are going out from Subscribe or SouthWatch (fund admin) but our team at FirstWave plus the teams at Subscribe and SouthWatch will be available for support as needed — everyone is getting white glove service.
Last week we hired our Junior Trader so the only open positions are Head of Investor Relations, Senior Equity Analyst (#2) and Junior Equity Analyst. I have some decent candidates for each of them.
This week all the furniture and hardware (workstations, monitors) are starting to arrive. We’re hoping to have the entire office setup by October 4th in which case all employees will be coming in October 6th. Some of us are already in there.
Given the overwhelming demand from investors we’re planning to do 4 funds in total, all based around gross, long, short and net exposure. Fund1 and Fund3 will launch first followed a month or so later by Fund2 and Fund4. Here is the framework for what each fund will look like… https://docs.google.com/spreadsheets/d/1TJ0dXFUyZ2AYxIfILHOm072Mg-w2Y6q67xgwvMJzEZ4/edit?gid=0#gid=0
During the client onboarding process every investor will get to select which fund they want to be in. If you’re a qualified purchaser you’ll be able to select up to 2 funds. If you’re an accredited investor you’ll need to select just 1 fund.
Minimums are changing slightly to reflect overall demand and slightly higher expenses…
US accredited: $700,000
US qualified: $450,000
Non-US: $350,000
**these minimums are $50,000 higher if an investor is doing in-kind contributions to help cover the higher operations, admin and audit costs that go along with in-kind contributions
Fees are changing slightly from the term sheet. They’re now more inline with the rest of the hedge fund industry which will put FirstWave in a better position to continue hiring the very best people we can find.
$0-$5 million = 2.00% management fee
$5-$10 million = 1.75% management fee
$10-$25 million = 1.50% management fee
$25+ million = 1.25% management fee
**20% performance / incentive fee for everyone with a high-water mark
As I’ve been learning over the past 6+ months… starting and operating a hedge fund is not cheap. Everything costs 1.5x more than I anticipated so the slightly higher minimums and slightly higher fees will ensure that FirstWave becomes a destination for top talent in the industry which is what our investors should want. If you’d like me to continue generating outsized returns then I need to make sure I can surround myself with the best people.
Within the next couple weeks I’ll be sending out a list of the stocks we will accept for in-kind contributions. As a reminder, the investor retains the cost basis on the stocks they are contributing but the cap gains won’t get triggered until FirstWave sells those shares. If you have any questions about in-kind contributions during the onboarding process our team will be here to assist you.
We’re planning to host a client event in 2026 Q1 in Miami… either Brickell or South Beach… but I won’t get into this now… we still have too many details to figure out including the actual dates and location.
I know many of you are planning to use your IRAs to invest in FirstWave which is wonderful because it means no taxes to worry about. In order to use your IRAs you’ll need to convert them into a SD-IRA (self directed IRA) at a custodian that has approved FirstWave. We’re currently working through the approval process with 5-6 IRA custodians (ie Fidelity, Schwab, Madison, Inspira, etc) and should have them finalized before we start the client onboarding.
All self-directed IRAs will go into the offshore fund (ie Cayman Islands) so we can use the tax blocker and not risk triggering UBIT which could happen if the SD-IRA’s went into the onshore fund (ie Delaware).
Speaking of SD-IRAs in the offshore fund… one of the only unanswered remaining questions we’re dealing with… actively speaking with our lawyers and auditors about this… is whether a US accredited investor that’s using their SD-IRA and going into the offshore fund will count as one of those 100 US accredited investors in each of the onshore funds. If we do 4 funds (onshore and offshore) and can have up to 100 US accredited investors in each of the onshore funds… but we don’t have to count the investors using their SD-IRAs in the offshore fund… then the total number of investors we can accept should be bigger. This might also give us some flexibility on minimums especially with the SD-IRAs in the offshore fund. We hope to have an answer to this question by the time we start client onboarding.
I think that’s all I have for now. If you have any time-sensitive questions, please email me at jonah@firstwavefund.com
If I don’t know the answer I will loop in one of my team members to assist you.
I look forward to having many of you in our FirstWave funds.
I’m extremely humbled by this opportunity so I promise to work hard and build the best team possible to manage your capital. I’m very confident FirstWave will put up extraordinary returns over the next decade and I’m excited many of you will be on this journey with me.
Our investment strategy is pretty straightforward… maximize the upside in good markets and minimize the downside in bad markets.
I will probably send out another update next week as we get closer to client onboarding.
Regards,
Jonah Lupton
FirstWave Capital