CFTC – Commodities Futures Trading Commission

NFA – National Futures Association

High Water Mark – the highest peak in value that an investment fund or account has reached

3(c)(1) & 3(c)(7) – portions of the Investment Company Act of 1940 that allows private funds to avoid the requirements of the SEC.

Accredited Investor – a person or entity that can deal with securities not registered with financial authorities by satisfying one of the requirements regarding income, net worth, asset size, governance status or professional experience.

Investment Adviser Representative – means an individual employed by or associated with an investment adviser or federal covered investment adviser and who makes any recommendations or otherwise gives investment advice regarding securities, manages accounts or portfolios of clients, determines which recommendation or advice regarding securities should be given, provides investment advice or holds herself or himself out as providing investment advice, receives compensation to solicit, offer, or negotiate for the sale of or for selling investment advice, or supervises employees who perform any of the foregoing. The term does not include an individual who: (A) performs only clerical or ministerial acts; (B) is an agent whose performance of investment advice is solely incidental to the individual acting as an agent and who does not receive special compensation for investment advisory services; (C) is employed by or associated with a federal covered investment adviser, unless the individual has a “place of business” in this State as that term is defined by rule adopted under Section 203A of the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-3a) and is (i) an “investment adviser representative” as that term is defined by rule adopted under Section 203A of the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-3a); or (ii) not a “supervised person” as that term is defined in Section 202(a)(25) of the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-2(a)(25)); or (D) is excluded by rule adopted or order issued under this [Act].

Qualified Client – category of investors that are exempt from the provision of the Investment Advisers Act of 1940 that prohibits private investment funds from charging performance-based fees.

Qualified Purchaser – individuals or family businesses with more than $5 million in investments, or other entities that meet certain requirements.

Qualified Eligible Person – person who participates in a commodity pool or opens a managed account. The categories of persons who qualify as QEPs are listed in CFTC Regulation 4.7(a).

Hybrid hedge fund – the hybrid hedge fund has become more popular in the last few years as managers realize they can mimic the prop desks of the major investment banks by playing the securities markets as well the private equity markets. In a hybrid fund the investment strategy is generally two-fold – first there is some sort of securities trading part of the program similar to a traditional style hedge fund (manfredine); second, there is some more illiquid portion of the program which might be a private placement into an operating company, real estate, etc. The hybrid fund is characterized by, among other things, the side pocket account.

Side Pocket Account – type of account utilized in hedge funds to differentiate illiquid assets from more liquid investments.

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