Tag Archives: hedge fund attorney

Hedge Fund Lock-Up Period

3 Replies

What is a hedge fund lock-up?

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 →

Green Fund of Hedge Funds

1 Reply

The following article on a green fund of hedge funds was originally published on the website www.socialfunds.com and can be found here.  (For more information on environmentally focused hedge funds, please also see our article on Carbon hedge funds.)

Over the Hedge: New Green Hedge Fund of Funds
by Anne Moore Odell

Kenmar plans to launch socially responsible hedge fund of funds for institutional investors.

SocialFunds.com — Kenmar recently announced that it will be launching a new SRI hedge fund of funds, the Kenmar Global ECO Fund SPC Limited, which will be available to investors July 1. Kenmar hopes to tap into the growing interest of investors in environmental, social, and corporate governance (ESG) issues while also achieving its goal of capital appreciation. Continue reading →

Operational Issues for Hedge Fund Managers Using Multiple Prime Brokers

Leave a reply

The hedge fund and investment management industry has seen many radical changes during the last year, including the consolidation (or elimination) of the large prime brokerage firms.  Because of these events many funds have moved to a multi-prime broker model instead of the more traditional single prime broker model.  There are obviously many advantages to going to a multi-prime broker model (including the reduction of prime broker bankruptcy risks), but there are also many logistical issues which need to be considered.

Start up hedge funds which wish to use a multi-prime broker approach should discuss this option with their hedge fund attorney as well as their hedge fund administrator which will be able to help with the back end aggregation of the prime brokerage fees.  Additionally, managers may want to seek a software solution like the one from Advent described in the press release below.  Continue reading →

Carbon Hedge Funds

2 Replies

Overview of Carbon Hedge Funds

The flexibility of the hedge fund structure is the central reason these investment vehicles are so popular.  The flexibility allows funds to specialize on certain investment sectors or strategies, and they can move quickly to the hot areas of the markets.  One of the hot areas of the markets is the movement toward green investments and strategies.  With this increased focus on energy and related areas, Carbon Hedge Funds have become a popular investment vehicle to focus on “carbon” as a new asset class.  This article will overview the two common carbon hedge fund strategies and will also provide resources for more information on carbon trading and other investments.  Please contact us if you have any questions on the information below or if you would like more information on starting a carbon hedge fund. Continue reading →

Hedge Fund “New Issue” Rule Changes

Leave a reply

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 →

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 →

Hedge Fund Fraud – Prominent Hedge Fund Attorney is Wrongdoer

Leave a reply

Usually our discussion of hedge fund frauds revolves around unscrupulous promoters who engage in some sort of fraudulent behavior against hedge fund investors.  Most of the time the fraud is based on some sort of ponzi scheme.  However, in the case reprinted below, the fraud was actually perpetuated against many hedge funds, including some funds with a significant amount of assets under management.  Even more incredible is that the fraud was perpetuated by a hedge fund attorney with a very impressive background.  While this is slightly different than hedge fund affinity fraud, it does show that frauds can be found on all scales and that hedge fund due diligence is important for both investors and hedge funds.  It is important, maybe now more so than ever, that hedge funds conduct proper due diligence on their counterparties when engaging in private placements and off-exchange transactions.  Please contact us if you have any questions on hedge fund due diligence. 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 →

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 →

Hedge Fund Law – Summary of Hedge Fund Laws and Regulations

14 Replies

he following is a summary of the major laws which affect the hedge fund industry.  If you have any questions on how these laws impact hedge funds in general or your specific situation, please contact us.

****

Securities Act of 1933 – the 1933 Act was enacted on May 27, 1933 as a reaction to the market crash of 1929. The overarching purpose of the act was to require that all “securities” be registered with the government (at the time the FTC). The Act provides some exemptions from this general requirement; for hedge fund managers, the most important exemption from registration is found in Section 4(2) which provides that securities will not need to be registered is they are sold in a transaction which does not involving any public offering. Continue reading →