Model 1 - Exchange account in the fund's name
The simplest option. The exchange account is opened in the name of the fund or corporate trustee, with the fund's ABN and TFN. Statements are clean, the auditor is happy, and valuations are trivial.
The cost is counterparty risk. The fund does not hold keys, and exchange failures have wiped out balances repeatedly. Acceptable for small allocations; increasingly uncomfortable as the balance grows.
Model 2 - Single-signature self-custody
A hardware wallet purchased and controlled by the trustee, with the seed phrase held in fund records. Counterparty risk disappears. Two new risks appear: the single point of failure on the seed, and the difficulty of proving to an auditor that the wallet belongs to the fund rather than the member.
If a fund uses this model, the trustee must document wallet creation, keep addresses on file, and store the backup somewhere that is demonstrably a fund location rather than the member's sock drawer.
Model 3 - Multisignature self-custody
A 2-of-3 wallet where the fund's trustees hold two keys and a professional partner holds the third. This is the strongest structure for larger balances. No single person can move fund assets, which satisfies both prudent trusteeship and the separation principle in spirit as well as form.
It also solves succession: if a member dies, the surviving trustee plus the professional partner can still access the asset without any disruption to the fund.
Model 4 - Institutional or collaborative custody
A regulated custodian holds the assets under an agreement in the fund's name. Reporting is excellent and audit evidence is trivial. The trade-offs are fees, minimums that exclude most funds, and reintroduced counterparty exposure - albeit to a regulated entity.
Choosing the model
Below roughly $50,000, a fund-titled exchange account is usually proportionate. Between $50,000 and $250,000, multisig starts to pay for itself. Above that, multisig or institutional custody should be the default, and single-sig self-custody should be avoided entirely because the failure modes are catastrophic and uninsurable.
Whatever model you choose, the documentation obligation is identical: addresses on file, a valuation methodology, signed minutes, and a written succession process.