Everybody Can Be Michael Burry: A Masterclass on Setting Up an Offshore Fund

Han Verstraete draws the boxes, literally, in this whiteboard masterclass with Anton Kouprianov on how a BVI fund is actually built — from share classes to redemption gates.

Everybody secretly wants to be Michael Burry — running a pool of assets, calling the trade nobody else sees. Most people assume that's out of reach. It isn't. A fund is more accessible, and cheaper, than the mental image most first-time managers carry around.

Why the British Virgin Islands, not Cayman

The majority of the world's funds still sit in Cayman or BVI. But Cayman has gotten institutional and expensive — a manager launching a $10–100M seed fund will feel under-scale there. BVI is where budding managers actually start: traditional-finance managers branching into a new asset class, or crypto managers spinning up a second fund, seats for 10 to 50 investors, up to roughly $100M.

The structure: one company, two share classes

A BVI fund isn't a GP/LP partnership, whatever the acronym-hungry corners of the internet assume. It's a normal limited company with one deliberate twist: two share classes instead of one.

Manager shares carry control and are held by the investment manager — the fund's decisions run through these, insulated from majority-rule governance among the investors. Participation shares are held by the investors who put money in; they share in the fund's net asset value, upside and downside, with zero say over day-to-day calls. That split is the entire architecture: control lives with the manager, economic exposure lives with the investors.

BVI also allows something almost no other jurisdiction does: two individuals, no corporate director required, can be named as the fund's directors — subject to a "four eyes" test that they're independent of each other (family members need not apply). Cayman, by contrast, wants at least one corporate director and will actively check whether a foreign investment manager is properly licensed. BVI doesn't run that check, which is a large part of why it's the faster, lighter-touch on-ramp.

Three tiers, and the thresholds that trigger real cost

• Under US$20M in assets (Incubator tier): no custodian, no fund administrator, no auditor required. KYC is self-set — friends, family and close contacts can come in without formal onboarding. You can be licensed and launched inside a month.
• US$20M–100M (Approved tier): a fund administrator becomes mandatory — useful anyway once you're taking subscriptions from more people and need an independent NAV calculation. No auditor required yet.
• Over US$100M (Professional / Private tier): full licensing, an auditor, the works — still lighter than most onshore equivalents, but no longer a friends-and-family operation. BlackRock's BVI-domiciled fund sits in this tier.

US investors expect a feeder, not a direct ticket in

US investors will almost always expect a Delaware LLC or LP feeder sitting between them and the offshore fund — not for a different economic outcome, but for tax reporting: the LLC issues K-1s, bundles the US capital, and buys shares in the fund as a single line on the fund's cap table. That's also how you get past the fund's ~20-investor practical ceiling: a Delaware feeder can hold up to 99 investors and still count as one participant at the fund level. Non-US investors typically come in direct, though European family offices sometimes expect their own feeder — Ireland, Switzerland or Luxembourg — adding meaningfully to setup cost.

The dozen terms actually worth negotiating

Otonomos works from a template term sheet that highlights roughly 12–15 commercial terms before a lawyer ever touches long-form drafting — deliberately, because spending legal budget re-litigating commercial terms with billable-hour counsel is where most managers overspend. The terms that matter most:

• Fee structure: the market default is still "2 and 20," but the mechanism behind the performance fee (absolute return, a hurdle rate, or a high-watermark) needs deciding up front. High-watermarks are rare in crypto funds for good reason — they're easy to structure against yourself.
• Notice periods and gates: how much warning an investor must give before redeeming, and a gate provision capping redemptions to roughly 10% of fund value in any period. Skip this and one bad month can trigger a stampede that empties the fund.
• Cost recovery: setup costs (typically US$20–50K all-in, fund plus manager) can be reimbursed to the manager out of fund assets.
• Performance fee routing: fees can flow straight to the manager, or into a separate performance fee vehicle for tax-efficient distribution among the people who actually generated the return.
• Manager skin in the game: investors expect the manager to hold participation shares on the same terms as everyone else, seeded from the manager's own capital, not a side deal.

Segregated portfolios, for when one fund isn't one strategy

Want Bitcoin-only exposure for some investors and a diversified basket for others? A single share class can't do that — every investor is exposed pro-rata to everything the fund holds. The workaround is a protected cell company (segregated portfolio company): distinct cells, each with its own investor base and P&L, sitting under one master structure. Still a fund, just a different shape.

Timeline: five days once the term sheet is frozen

BVI doesn't run a formal application — it's a notification to the Financial Services Commission, backed by manager disclosures and the frozen term sheet, with a five-business-day response window. The real time cost sits upstream of that: freezing the term sheet and drafting long-form legals typically takes about three weeks, plus however long custodians, administrators and auditors take to negotiate their own agreements — often the actual bottleneck, since those providers move slowly and everyone quotes high before you negotiate down.

Closed-end vs. open-end

Illiquid strategies (VC, private equity) are closed-end: investors commit for a fixed vintage, typically five years plus extensions, with no redemptions until exits happen. Liquid strategies (most crypto funds) are open-end: investors can redeem on a set schedule, and the fund can keep taking subscriptions. The friction case is a liquid fund holding illiquid instruments — a SAFT with no secondary market, for instance — where redemption requests can outrun what the fund can actually convert to cash.