For the new year we will publish a list of common questions we receive from our readers. This question involves hedge fund valuation.
Question: Can a hedge fund provide its own valuation?
Answer: Generally yes, provided that the hedge fund offering documents state that the valuation of the hedge fund’s assets will be conducted by the fund – more specifically by the hedge fund’s management company. In many hedge fund documents a provision which allows a manager flexibility in valuation is standard – although, it is likely that these normally nebulous provisions will become more specific as institutional investors require greater specificity in the offering documents. Continue reading →
Recently there have been many discussions about hedge fund structures and terms, including the ability (or inability) of investors to withdraw from hedge funds. Generally the manager will have a number of structures in place to make sure that capital stays in the hedge fund. These provisons include the hedge fund gate, the ability to limit all withdrawals in certain circumstances, and the hedge fund lock-up provision.
The hedge fund lock-up provision is a provision which provides that during a certain initial period, an investor may not make a withdrawal from the fund. The period when the investor cannot withdraw the funds is known as the actual lock-up period. Continue reading →
Minor Modifications to “New Issues” Rule Approved; New FINRA Rule 5130
FINRA (formerly the NASD) has been reworking a new rulebook which means that many rules have been modified and renumbered. At least one important hedge fund rule has been renumbered. The “new issue” rule, which affects hedge funds and other members of the securities community, has been slightly modified and is now known as FINRA Rule 5130 (formerly Rule 2790). Hedge fund managers should discuss with their attorneys whether their hedge fund offering documents need to be updated to reflect this change. Continue reading →