Category Archives: Hedge Fund Structure

Non-Accredited Investors in Hedge Funds

4 Replies

Many start-up hedge fund managers want to know if their friends and family can invest in the start-up hedge fund.  Most of the time, such friends and family do not fall within the definition of accredited investor under the Regulation D rules. The regulation D rules allow a maximum of 35 non-accredited investors to invest in any single offering.  Because a hedge fund offering is continuous, the limit of 35 non-accredited investors is cumulative.  That means that over the life of the fund there can be no more than 35 non-accredited investors (as opposed to 35 non-accredited investors in the fund at any single point in time). Continue reading →

BVI Offshore Hedge Fund – BVI Entity Formation and Costs

2 Replies

British Virgin Islands Hedge Funds

The British Virgin Islands (BVI) is the second most popular jurisdiction for offshore hedge funds behind the Cayman Islands.  In many ways the offshore hedge fund formation process is better in the BVI, and it is certainly much cheaper.  This article will detail the costs to establish a management company and a hedge fund in the BVI.  It will also detail to costs for BVI registered agent services. Continue reading →

Segregated Portfolio Companies for Offshore Hedge Funds

4 Replies

Hedge Fund Segregated Portfolio Companies

A segregated portfolio company (SPC) is a single entity structure which contains a series of segregated portfolios (sometimes referred to as “cells”), each of which is regarded as a separate legal entity for asset protection purposes.  For offshore hedge funds, the segregated portfolio company is the functional equivalent to the domestic hedge fund series LLC.  This article will detail: SPC jurisdictions, SPC Offshore structures, SPC offering documents, SPC advantages and SPC disadvantages. Continue reading →

Hedge Fund Series LLC

4 Replies

The Series LLC

Most hedge funds are structured as either limited partnerships or as limited liability companies (LLCs).  Some hedge funds, however, are structured as series limited liability companies.  The series limited liability company is a relatively new statutorily created entity.  The series LLC is one entity with a group of series each of which is bankruptcy remote from each other series.  This means that the assets of one group or series of assets are protected in the event another group or series of assets becomes subject to suit or other action.  This article discusses the primary uses for the Series LLC in the hedge fund industry, the advantages and disadvantages of the series LLC and other issues involved with the formation of a hedge fund as a series LLC. Continue reading →

Master Feeder Organizational Chart

3 Replies

For hedge fund managers which are establishing a hedge fund for the first time, it is often easier to understand the dynamics between the different entities through an organizational chart.  This is especially true for an offshore master feeder hedge fund which has more moving parts and also has (generally) a different fee structure based on the characteristics of the hedge fund manager’s trading program and the expected tax attributes of the underlying investments.  Additionally, the tax residence of the offshore investors must be considered in many circumstances. Continue reading →

Hedge Fund Strategy – Energy Focused Hedge Funds

Leave a reply

We have previously provided an overview of hedge fund trading strategies.  While we mentioned the major trading strategies, we did not mention some of the more niche trading strategies like energy focused hedge funds.  Energy focused hedge funds can utilize a number of different trading strategies from investing only in energy related companies to investing only in energy commodities (commodity pools). Like many of the different strategies, the structure of energy hedge funds will depend on a number of factors including the instruments traded and the expected lifespan of the investments.  Additionally, if the energy hedge fund does trade in commodities, the manager may need to be registered as a CPO.  Continue reading →

Hedge Fund Consultant

3 Replies

Hedge fund consultants are individuals or firms that provide a variety of different services to hedge funds and hedge fund managers.  These individuals or firms typically have significant industry expertise and a strong network within the investment management industry.  These groups also tend to have a strong working knowledge of the mechanics of the hedge fund investment process.  Accordingly, managers will utilize hedge fund consultants for a variety of reasons in order to get the most out of their hedge fund. Continue reading →

Hedge Fund Structure – Hedge Fund Organizational Chart

3 Replies

A common issue which often arises is exactly what manner in which the investors actually subscribe to the fund and how the fund actually invests the money.  The attached chart (Hedge Fund Organizational Chart) provides a typical hedge fund organizational structure.  The chart also details the movement of the management fee, the performance fee, the movements of money, and hedge fund subscriptions or withdrawals. Continue reading →

Recommended Hedge Fund Articles for Start-up Hedge Fund Managers

15 Replies

Last week we posted our most popular hedge fund articles to date.  This week we are providing start up hedge fund managers with a “hedge fund manager start up guide” which consists of the most important articles for start-up (and existing) hedge fund managers.  The following article provide you with the background information you need to be prepared to begin the hedge fund formation process.

Our group has worked with over 200 start up hedge funds and hedge fund managers and we know the issues which managers are concerned about.  Please contact us if you have any questions on these articles.

Hedge Fund Presentation

  • Start Up Presentation – this voice-over presentation goes over most of the topics covered in the posts below.  The presentation is about 40 minutes long and discusses the basic issues involved in starting a hedge fund.

The Basics

Investors and Fees

Structural Issues

The Laws

Raising Hedge Fund Assets

Other Recommended

Hedge Fund Service Providers Overview

2 Replies

The hedge fund industry includes not only the hedge fund managers and the investors, but also the service providers that help the hedge fund and the manager with the day to day duties associated with running a hedge fund.

The industry has grown rapidly over the last decade and continues to develop at an ever rapid pace.  In the beginning there were hedge fund attorneys, prime brokers, hedge fund administrators, hedge fund auditors, but now we also have consultants, website designers, due diligence experts and compliance firms.  All of these businesses fall within the category of hedge fund service providers.  I’ve detailed the various roles of these businesses on other parts of this blog, but am producing this overview which should be especially helpful for start-up hedge funds. Continue reading →