Tag Archives: hedge funds

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 →

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 →

North Carolina Hedge Fund Law

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Starting a hedge fund in North Carolina

The North Carolina Securities Division has a very good website which provides great information for managers based in North Carolina.  Unlike many securities divisions, it informs the public when new securities rules are proposed and provides links to the proposed rules.  The site also has a very good FAQ section for start up hedge fund managers in North Carolina.  We’ve posted the FAQ section below for your information.  If you have any questions starting a hedge fund in North Carolina, please contact us discuss with a hedge fund attorney.  Other related hedge fund law articles include: Continue reading →

Can a hedge fund value its own assets?

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Hedge Fund Questions

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 →

Idaho Hedge Fund Law

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Idaho has another well run securities division and their website is particularly helpful.  The information below comes from their website and describes the major laws that hedge fund managers in Idaho need to be concerned about.  The information is applicable to traditional securities-only hedge fund managers (with regard to investment advisor registration) and also to forex hedge fund managers.  Like many states Iowa has enacted a commodity code which may apply to forex managers depending on the nature of the manager’s forex program.  Continue reading →

Starting a Hedge Fund – Primer for Start Up Hedge Fund Managers

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How to Start a Hedge Fund

Many future hedge fund managers have misconceptions about how to start a hedge fund – either they think it is a very basic process that takes no time or resources, or they think that it will take too much time and will be cost prohibitive.  For most start up hedge funds, the manager can be up and running within a month depending on whether the manager will need to be registered with the state securities commission (please see our article on start up hedge fund timelines).  This article will detail the steps the manager will need to take to start the hedge fund. Continue reading →

Offshore Hedge Funds – Side by Side Hedge Fund Structure

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Offshore hedge funds can be structured in a number of different ways including a stand alone structure, a master-feeder structure and a side by side structure.  This article discusses the side by side hedge fund structure and also provides a side by side offshore hedge fund organizational chart.  As we have noted earlier in an article regarding offshore hedge fund structural considerations, a side by side offshore hedge fund is a structure consisting of two distinct entities which are managed in the same way by a single management company.

I attached the following Offshore Side by Side Hedge Fund Organizational Chart so that hedge fund managers can get an idea of the structures involved and the flow of payments. This specific chart details (1) a management fee and a performance allocation paid from the domestic counterpart and (2) a management fee and a performance fee paid from the offshore counterpart.  Offshore hedge fund managers should discuss these aspects of their offshore hedge funds with their attorneys. Continue reading →

New Hedge Fund Regulation: Guidance From Former SEC Commissioner Should be Followed

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In the conversations the hedge fund community will be having with Congress and the regulators in the coming months regarding increased regulation, we should look to shared answers to the issues which need to be addressed.  In this vein, I have been researching the speeches of prominent SEC personel.  I have just recently reviewed a speech by former Commissioner Paul Atkins regarding regulations and how regulations impact the investment management community.  Perhaps surprising to some, the former Commissioner showed reasonably thinking with regard to increased regulation.

The speech, reprinted in its entirety below, was given in the wake of the proposed adoption of two rule changes back in December of 2006.  The first proposed rule change was to amend the Investment Advisers Act so that it was clear that hedge fund managers had an anti-fraud duty to the investors in their hedge funds as well as the hedge funds themselves.  The second proposed rule was the “accredited natural person” rule which would effectively change the potential make up of hedge funds by requiring a different net worth threshold for investors in hedge funds.  There were a significant amount of comments to the proposed rules which stated that it would be a bad idea to raise the net worth requirements for hedge fund investors.  Neither of the proposed rules have been adopted and it is unlikely that they will be, at least in the near future.  Continue reading →

Hedge Fund Service Providers Overview

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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 advertising – Can a hedge fund manager run a blog?

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Blogs have become important tools in the investment management industry and have allowed even the most unsophisticated computer user (ahem….hedgefundlawblog….) to post useful thoughts and information for other industry participants to examine and opine upon.

Some hedge fund managers may want to use the internet and blogs to vet ideas or to discuss certain parts of their strategy, which begs the question whether such activities are legal under the federal (and state) securities laws.   As we see it, there are three central issues which a hedge fund manager must be aware of when deciding whether to blog: (i) the Regulation D rules prohibiting general solicitation, (ii) the “no holding out” requirement for investment advisor exemption, and (iii) the anti-fraud rules (no manipulation).  We will examine these issues in turn and then provide recommendations. Continue reading →