Hedge Fund Taxation

(www.hedgefundlawblog.com)

Overview of the Tax Issues Affecting Hedge Funds

One of the most important aspects of the hedge fund structure are the tax aspects as they relate to the hedge fund, the manager and the investors. This article will detail the important tax aspects which are relevant to most hedge funds. Please note that any of these individual tax aspects may or may not apply to certain hedge funds – for information on a particular fund’s tax attributes, refer to such fund’s private placement memorandum. Please also note that this article is not seeking to provide any sort of tax advice to managers or hedge fund investors, please see our disclaimer for information on IRS circular 230. [The following article deals with domestic hedge fund taxation. We will provide another article on offshore hedge fund taxation in the future.] Continue reading →

Hedge Fund Predictions for the New Year

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Typically we do not comment non-law related hedge fund news stories. However, we’d like to point attention to a very good article which opines on the likely trends for the hedge fund industry in 2009. This article will be good reading for those managers who are starting a hedge fund in 2009. The following are the takeaways from the article:

– Market neutral strategies to see increased demand
– Trend toward less leverage
– Investors are expected to ask for increased transparency and liquidity
– Short biased funds will be popular
– Commodity programs will become more popular
– Shrinking assets until end of Q2
– Institutional investors expected to dominate investor landscape Continue reading →

Commodity Hedge Fund Reminder

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CPOs Reminded to Always File Timely Reports

The following release details the CFTC sanctions against four commodity pool operators (CPOs) for failure to make timely filings with the NFA. The CPOs failed to make filings of the respective commodity pool annual report. This report must be provided to all pool participants (investors) and must also be filed with the NFA. In certain circumstances the NFA will provide extensions to CPOs. We also note that the filing requirement applies to those CPOs who run hedge fund of funds which are also commodity pools. Continue reading →

New Mexico Hedge Fund Law

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Starting a hedge fund in New Mexico

Hedge fund managers who reside in New Mexico will be deemed to be investment advisors under New Mexico’s securities act and, unfortunately, there is no exemption available from the registration provisions of the act. This means that before a manager establishes a fund based in New Mexico, he will need to become registered as an investment advisor.

The people at the New Mexico Securities Division are fairly knowledgable and have been very helpful in the conversations we’ve had with them. However, they have a horrible securities division webpage. The webpage has very little useful information save for the links to the New Mexico laws (which are hard to navigate through). I have posted below a list of the fees which are applicable to a hedge fund manager establishing a business in New Mexico. Continue reading →

Hedge Fund Job Posting

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Below is a job posting for a hedge fund job. If you have any questions (or if you have job postings or press releases), please feel free to contact us.

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Hedge Fund Partner w/ Significant Portable Business

A mid-sized firm in New York has an immediate need for a Hedge Fund Partner. The partner will represent individual and institutional fund managers in the establishment and ongoing operation of private investment funds (hedge funds and private equity funds), both domestic and offshore. Experience in the following practice areas are preferred: Mergers & Acquisitions, Joint Ventures and Strategic Alliances, Asset-Based Finance, Investment Management, and Corporate law. Great location and firm to build existing practice. Top benefits package.

Promotion Recruiting & Consulting is a professional legal search firm. We assist law professionals in their job search and law firms who employ top talent in the Eastern, US.

APPLY: Send resume to Ericka Meens at [email protected] (please mention the Hedge Fund Law Blog) Continue reading →

Hedge Fund Audits Post Madoff

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Hedge Fund Audits Expected to Increase in Importance

The Madoff scandal has shown the hedge fund industry many things, not the least of which is the importance of hedge fund audits. While the details of Madoff’s audits are still a little unclear, it has been widely reported that the audit firm he used was a little known shop which is tightlipped. This article investigates reaction of hedge fund investors with regard to hedge fund audits going forward. (Please note, the Maddoff investment firm was not a hedge fund; however, the scandal will likely have a great influence on hedge fund due diligence and audit standards.) Continue reading →

Virginia Hedge Fund Law

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Starting a hedge fund in Virginia

Those hedge fund managers who are starting a hedge fund in Virginia can potentially fit within an exemption from the Virginia investment advisor registration rules. Like many states which follow the Uniform Securities Act, investment advisors with a place of business in Virginia must register with the securities division (see FAQs below on Virginia investment advisor registration).

However, managers who have funds which start out with more than $5 million in assets, and which are exempt from investment advisor registration with the SEC, may be able to fit within an exclusion from the definition of the term investment advisor and thus not required to be registered with Virginia. We provide the statute and analysis below. Continue reading →

SEC Stands Behind “Fair Value” Accounting

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FASB may re-evaluate FAS 157 in light of recent market events

While the SEC does not directly control the manner in which hedge fund assets are valued for the purpose of striking a NAV for a fund, the SEC valuation policies are important for hedge funds in a number of different ways. Maybe most important is that the SEC valuation guidelines require issuers of securities to adhere to certain valuation practices with regard to their own assets. Recently Congress mandated the SEC reevaluate its valuation guidelines in light of the market collapse of 2008. Continue reading →

Hedge Fund Disclaimer

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How to write a hedge fund disclaimer

One of the more unusual requests (in my opinion) that we receive on this site is how to write a hedge fund disclaimer. I think that this is unusual because I would assume that most hedge fund managers would want to make sure that anything with a disclaimer has been reviewed and approved by a hedge fund attorney. If you are a manager who is looking for an “off the shelf” disclaimer, I recommend that you speak with a hedge fund attorney instead. Any hedge fund marketing or promotional materials (including hedge fund websites) should be reviewed by an attorney prior to publishing or dissemination. Continue reading →

How to Invest in a Hedge Fund

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Hedge Fund Investors Guide

Many potential hedge fund investors come to this website for information on how to invest in a hedge fund. While there are many headlines and resources for hedge fund managers, there are fewer resources out there for hedge fund investors. This article will provide an overview of how to go about investing in a hedge fund. Continue reading →