What is Reece Fund?
Reece Fund is a Christian private equity project created to acquire businesses, operate them under God’s law to the glory of Jesus Christ, and to pursue high returns for investors.
What kinds of businesses does Reece Fund acquire?
Reece Fund’s acquisition profile is generally focused on manufacturing and construction-related businesses in the $2M to $10M EBITDA range. This is a sector of businesses that are often neglected by private equity firms. Businesses in this profile can generally be purchased at lower prices relative to their profitability compared to larger businesses. Reece Fund and its affiliated entities have experience acquiring and operating businesses in this profile and can identify businesses in this profile with the greatest potential for growth. The more growth, the higher returns for investors. Moreover, small businesses in the “blue collar” sector tend to have a workforce demographic of average American men who Reece Fund wants to disciple to be Christian leaders in the workplace, in their households, and in the civic sphere.
Who can invest in Reece Fund?
Reece Fund is seeking Christian investors who are prepared to take bold risks for high returns. Because Reece Fund’s offerings are exempt from SEC registration, Reece Fund can only accept investment from “accredited investors.” Reece Fund intends to launch an offering for unaccredited investors in the future.
Are Reece Fund securities registered with the SEC?
No. Reece Fund’s securities offerings are private offerings exempt from registration under SEC Regulation D, Rule 506(c).
What kinds of securities does Reece Fund offer?
Reece Fund offers two investment options: (1) an Equity Investment consisting of preferred non-voting stock that includes fixed dividends and growth-driven redemption options that target 30%+ annual returns; and (2) a Bond Investment consisting of unsecured five-year corporate bonds that target a 12% annual return.
How is Reece Fund different from conventional private equity fund?
Conventional private equity funds operate on a “buy-and-flip” model. Under this model, the fund generally deploys capital from investors to acquire businesses, develops the business, then liquidates its portfolio at a gain, delivering returns to investors through an exit “waterfall.” Reece Fund’s model, however, is “buy-and-hold.” Our goal is to operate the portfolio businesses in perpetuity. However, our Equity Investment include redemption options that are designed to target returns for investors that are comparable to the “waterfall” exit returns conventional private equity investors typically see.
Is Reece Fund a “blind pool” fund? What does that mean?
Yes, Reece Fund is a “blind pool” fund. This means investors contribute capital to a specific holding company fund but do not participate in the acquisition decisions. Reece Fund’s acquisition team makes the decisions about how capital will be deployed in accordance with our overall acquisition strategy. Reece Fund’s interests are fully aligned with those of investors to strategically acquire and operate portfolio companies to maximize profitability. Investors will not be entitled to vote on any acquisition or operational decisions. However, as described below, Reece Fund occasionally offers investment opportunities outside of the blind pool fund on a deal-by-deal basis.
Is Reece Fund an “investment company”?
No. Reece Fund is not an “investment company” within the meaning of the Investment Company Act of 1940. Each annual fund (or holding company) will have no more than 100 beneficial owners. Therefore, Reece Fund and each of its annual fund corporations are exempt under Section 3(c)(1) of the Investment Company Act.
Are Reece Fund investors guaranteed to make returns?
Reece Fund is for investors who want to talk bold risks to target high returns. There can never be any assurance or guarantee of a particular return or any return at all.
How is Reece Fund structured?
Reece Fund as an entity is a Wyoming series limited liability company. Reece Fund’s purpose is to serve as the managing entity of a portfolio of acquired businesses. Through its series cells, Reece Fund holds the common (voting) stock of corporate holding companies (funds). These funds are the vehicles that acquire and hold portfolio business. The intent is for each fund to hold 3-5 operating portfolio businesses. Investors invest in preferred stock in the funds, or in corporate bonds issued by the funds. Reece Fund’s intent is to roll out a new fund each year.
How do Equity Investments work?
Reece Fund’s Equity Investment consists of preferred non-voting stock in a corporate holding company (fund). Investors purchase shares in the fund for $10,000 per share. Each share receives a fixed monthly dividend of $100.00 (or 1% per month), annualizing to a 12% annual return. In addition to the dividend, Equity Investments include call and put options with a growth-driven strike price formula. The fund will have the right to call (buy back) at any time. Investors will have a right to put (force the sale) of their shares at 7 years. The strike price for both the call and the put option is based on a formula tied to the EBITDA growth of the portfolio businesses in the fund. The strike price has a floor equal to 150% of the purchase price.
Here’s a hypothetical to explain how Equity Investments work: Suppose Jones buys $1,000,000 worth of preferred stock (100 shares). Jones holds this stock for five years. During that five-year period, the fund acquires portfolio businesses and the average EBITDA of the portfolio grows by a multiple of 3X. If at the five-year mark, the fund exercises its call option to buy back Jones’ shares, the total strike price for this redemption would be $3,000,000. In addition to Jones’ returns from fixed dividends over those five years ($600,000), Jones would receive an additional $2,000,000 in returns when his shares are redeemed. Under this scenario, after 5 years, Jones’ total investment gain would be $2,600,000, which would be a 260% ROI, annualizing to 29.2%.
How do Bond Investments work?
Bonds will have a maturity period (or duration) of five (5) years and will yield interest at 12%. The issuing fund corporation will repay the principal amount after five years. Coupon payments of interest on the bond notes will be semi-annual, meaning that the issuing fund corporation will pay out the interest rate every six months over the course of five years.
Are Reece Fund investments liquid?
No. Investors will have no right to redeem their bonds before maturity, to sell their shares of stock back (other than under their call and put options), or to otherwise receive their investment funds back prior to the predetermined liquidity events for each investment. However, Reece Fund will review requests from investors to receive their investment funds back. Reece Fund will make a determination each quarter on all the requests made by investors for the previous quarter. Reece Fund will have the discretion (but no obligation) to grant all or some of the requests received. If any equity investor’s request is granted, that equity investor’s investment funds will be returned with no gain. The investor will have forfeited his rights to receive any dividends as well as rights to receive any return or gains on his investment.
How does Reece Fund plan to profitably operate portfolio businesses?
Reece Fund’s team has experience operating businesses in the manufacturing and construction-related spaces. To the end of streamlining operations and maximizing efficiency, Reece Fund has a central services entity called Republic Central LLC that will provide essential business services to each of the portfolio companies in exchange for a small monthly fee to offset the payroll cost to Republic Central. These central services include legal, IT, marketing, procurement, accounting, payroll, and human resources. Utilizing Republic Central’s services across the portfolio businesses is likely to significantly minimize overhead expenses for those businesses and to allow on-the-ground managers to focus on maximizing revenue to increase earnings as much as possible.
What is Reece Fund’s acquisition strategy?
- Promoting Christian Culture: Reece Fund will seek to acquire profitable businesses that already are or have been operated on Christian principles, that have been under Christian ownership, or that can be easily reformed into operating on Christian principles. Reece Fund will be targeting companies that have the greatest potential for Christian influence not only in the company’s own workforce and internal culture, but also that have the greatest strategic potential to spread the Gospel, promote God’s Law, and Honor the Lord Jesus Christ.
- Equipping Free Men to Preserve Liberty: One trait Reece Fund will be looking for in acquisition targets is that of a business’ role in creating “tools of liberty,” including products, technologies, information, or resources that equip free men to protect themselves, prosper their homes, and defend their God-given rights. Reece Fund will not be seeking to acquire businesses that (directly or indirectly) promote wickedness, idleness, sexual immorality, or vain entertainment, or whose products or services are exclusively used for those sins.
- EBITDA Growth Potential: Reece Fund will be focusing on acquiring businesses that have growth potential and whose revenues and profits can be increased significantly with relatively low capital expenditures. EBITDA growth of the portfolio businesses is the metric by which equity investors’ possible return is calculated. The higher the EBITDA growth of the portfolio businesses between acquisition and the exercise of any call or put option, the higher the possible return for equity investors.
- Targeted Industry Sectors: Reece Fund’s main focus for acquisition targets will be domestic American businesses in the manufacturing industry. However, Reece Fund may acquire portfolio businesses in other sectors such as construction and retail.
Does Reece Fund have any deal-by-deal offerings outside of the blind-pool fund?
Yes. Occasionally, Reece Fund will offer investors the opportunity to participate in a “spot-funding” capital raise on a deal-by-deal basis. These offerings are outside of the blind-pool fund. These offerings can have terms and returns that are different than those of the standard investment options in the blind pool fund. If you are interested in any deal-by-deal offerings Reece Fund has available, contact us at invest@reecefund.com.