What is a Club Deal?

Introduction 

In a constantly evolving investment context, the Club Deal is an attractive alternative for investors who want to pool their resources in order to access exclusive opportunities. This collaborative investment method allows a small group of investors to group together to finance a joint project, thus benefiting from risk diversification and optimized capital management.

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The Club Deal concept is gaining momentum, in particular thanks to digitalization and regulatory changes that facilitate the structuring and management of these operations. Formerly reserved for institutional investors or wealthy individuals, this approach is now open to a wider community, in particular via dedicated platforms and specialized SaaS solutions.

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In this sheet, we will explore in detail how a Club Deal works, its differences with other forms of collective investment, the actors who initiate it, its different typologies as well as its legal framework. Finally, we will see why this investment model represents a strategic opportunity in a changing market and how Fraktion supports the digitalization and management of Club Deals.

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Definition and operation of the Club Deal

The Club Deal is based on a simple principle: a group of investors comes together to finance a specific project, whether it is a real estate asset, an unlisted company or an entrepreneurial project. This model makes it possible to pool risks and benefit from collective expertise to select the most promising opportunities.

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Unlike traditional investment funds, which impose strict management and diversification rules, the Club Deal offers greater flexibility. Investors directly choose which projects they want to get involved in, based on their preferences and risk tolerance.

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Differences between Club Deal and other forms of collective investment

To better understand the specificities of the Club Deal, let's compare it to the other most common forms of collective investment:

Club Deal vs Investment Funds

Traditional investment funds collect money from numerous investors and entrust the management of investments to a professional entity that decides where to invest. These funds generally distribute capital across several types of assets, such as real estate, stocks, bonds or even private equity, in order to diversify risks and optimize returns. On the other hand, in a Club Deal, each investor maintains control and directly chooses the projects in which they want to participate. In addition, a Club Deal generally specializes in a single type of asset, such as real estate or private equity, which allows for a more targeted approach and better control of risks specific to this sector.

Club Deal vs SCPI

SCPIs (Société Civiles de Placement Immobilier) offer collective investment in real estate, but without direct investor control over the assets acquired. This means that decisions to buy, manage and resell goods are made entirely by the management company, without the intervention of investors. Conversely, in a Club Deal, each member can actively participate in strategic decisions, such as asset selection, management conditions or even the resale of investments. In addition, SCPIs usually impose more stringent entry and exit constraints, with limited liquidity and sometimes high fees for investors wishing to sell their shares, while a Club Deal offers more flexibility in the structuring and duration of commitments.

Club Deal vs Crowdfunding

Crowdfunding allows a large number of participants to finance various types of projects, whether they are startups, artistic projects or humanitarian initiatives. This model is based primarily on contributions in the form of grants, loans, or investments in exchange for consideration. On the other hand, a Club Deal operates on a structured investment logic where participants acquire financial securities or shares in a company or an asset. Crowdfunding is generally open to everyone, with accessible investment amounts, while the Club Deal is reserved for a limited number of investors with more strategic involvement and often higher entry amounts.

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Who are the initiators of Club Deals?

Club Deals are generally set up by actors with specific expertise and a qualified network. Among them, we find professional investors such as entrepreneurs and business angels with significant investment capacity, seeking access to exclusive opportunities. Family offices are also present in this dynamic, seeking to diversify their assets outside of traditional investments. Likewise, some investment funds structure transactions targeted at assets with high added value.

• professional investors such as entrepreneurs and business angels with significant investment capacity, seeking access to exclusive opportunities. Family offices are also present in this dynamic, seeking to diversify their assets outside of traditional investments. Likewise, some investment funds structure transactions targeted at assets with high added value.
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• Investor community leaders and industry experts that federate a qualified network around strategic opportunities. Some specialized experts, particularly in the biotech, fintech or real estate sectors, use their know-how to structure these collaborative investments. In addition, real estate companies and developers see Club Deals as a way to secure alternative financing for their projects.
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• more atypical profiles such as groups of doctors, manufacturers or even some celebrities exploit their network to create a Club Deal and access unique opportunities.

Each initiator plays a key role in the structuring, management and animation of the Club Deal, thus guaranteeing the relevance and profitability of the investments made.

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Categorization of Investor Clubs according to the nature of the investments

Club Deals can be classified according to the nature of the assets in which they invest. This categorization makes it possible to better understand their specificities and the opportunities they offer to investors. Depending on the objectives and the level of risk accepted, investors may prefer Club Deals focused on real estate, growing businesses, alternative assets or even private debt. This distinction is essential in order to adapt investment strategies to the expectations of participants and to the dynamics of the market.

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Real estate club deals : This type of Club Deal mainly concerns the acquisition of real estate assets, whether for a long term of ownership or for promotion and resale operations. It allows investors to group together to buy a high-value property, generating rental income or an increase in value upon resale. It is often used by property developers or dealers who want to secure their financing.

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Private Equity Club Deals : Here, investors take stakes in unlisted companies, often in the growth or transfer phase. This type of Club Deal allows access to opportunities that are normally reserved for institutional investors. It generally involves well-defined governance mechanisms as well as exit strategies, such as resale to a strategic player or an IPO.

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Venture Capital Club Deals : This type of Club Deal focuses on investing in startups with high growth potential. Investors take minority or majority stakes in young innovative companies, often in addition to other forms of financing such as business angels or venture capital funds.

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Club Deals as alternative assets : Some Club Deals specialize in atypical investments, such as art, renewable energies, infrastructure or cryptocurrencies. This type of Club Deal allows investors to explore less conventional and potentially very profitable markets.

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Club Deals in private debt : Unlike other types of equity-based Club Deals, here, investors lend funds directly to businesses in exchange for a fixed return. This method of financing, generally reserved for large structures, makes it possible to avoid banking constraints and to negotiate advantageous conditions.

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The methods of organizing Clubs Deals

The way a Club Deal is organized influences its governance and accessibility. Some operate with strict and formalized rules, while others prefer more flexible and informal structures.

Structured vs informal club deal

Some Club Deals are highly structured, with precise rules concerning the entry of investors, asset management and the redistribution of profits. These Club Deals define a strict contractual framework from the start, ensuring clear governance and well-established collective decision-making. Others operate more informally, relying primarily on trust and personal relationships between investors. This type of Club Deal is often set up by circles of friends, business partners or members of the same professional network, without a rigid legal structure. Commitments are generally more flexible, but this can also lead to a lack of formalism in management and decision-making.

Closed club vs Open club

Closed clubs operate by invitation only, which means that only investors selected by founding members or managers can access them. This mode of operation guarantees a certain exclusivity and tighter control over participants' profiles. On the other hand, open clubs allow for the regular renewal of members, with more flexible entry procedures, thus promoting a greater diversity of profiles and a gradual expansion of the network of investors. However, even in an open club, it is recommended to set a limit on the number of members in order to ensure smooth decision-making and investment management. Too many participants can complicate governance and slow down strategic processes.

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Each type of Club Deal meets specific objectives and adapts to the profile of the investors involved, whether they are looking for short-term profitability or a long-term wealth strategy.

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Regulation and legal framework of a Club Deal

The initiators of Clubs Deals must ensure that their structure complies with all legal obligations in force. Poor structuring or a breach of compliance rules can lead to financial or legal sanctions. In addition, contractual management between investors must be well defined to avoid disputes and ensure effective governance.

Regulatory framework and legal obligations

Club Deals must comply with the regulations of the competent financial authorities, such as the AMF in France or the SEC in the United States, guaranteeing the protection of investors and the transparency of transactions. These regulations aim to protect investors and ensure the transparency of financial transactions.

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They must also comply with tax standards and choose an appropriate legal structure in the form of a SPV (Special Purpose Vehicle). An SPV is a legal entity created specifically for a given investment, making it possible to isolate risks and optimize asset management. Common forms of SPV used in Club Deals include SCI (Real Estate Civil Society), the SAS (Simplified Joint Stock Company), the SA (Limited Company) or even the SCA (Limited by Shares Company).

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The choice of structure has a direct impact on the taxation of earnings, the responsibility of investors and governance arrangements. And some structures, such as private equity funds or certain forms of SPV, are limited to a maximum of 149 investors, which can influence the strategy for forming the Club Deal.

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Investor clubs must comply with KYC (Know Your Customer) and AML (Anti-Money Laundering) obligations to prevent money laundering and ensure the traceability of transactions, which requires strict checks of investors and financial flows, to combat money laundering and terrorist financing. These standards require rigorous identity checks on investors and increased transparency on financial transactions.

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