October 12, 2016
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Starting a Hedge Fund in New York–Legal Considerations

John S. Lore, Esq. | Capital Fund Law Group, PC New York is the world’s most popular jurisdiction for starting a hedge fund, as well as one of the top states for startup private equity funds, real estate funds and other […]
December 1, 2015
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A Hedge Fund Attorney’s Perspective on the Process of Starting a Fund

The process for starting a hedge fund involves much more than a hedge fund attorney drafting the disclosure documents and preparing regulatory filings.  Drafting the documents is only one component of a comprehensive fund formation process.  A common mistake we see is hedge funds that are […]
November 25, 2015
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Exempt Reporting Adviser Registration for Hedge Funds and Private Equity Funds

Dodd-Frank exempts from registration two types of advisers: (i) advisers to qualifying venture capital funds; and (ii) advisers solely to private funds (including hedge funds and private equity funds) and having less than $150 million of assets under management.  These […]
November 21, 2015
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Qualifying a Delaware Hedge Fund in the Manager’s Home State

Since domestic hedge funds are typically formed in the state of Delaware, managers must qualify the fund to do business in the manager’s state of operation.  This is known as foreign qualifying.  Foreign qualifying simply means registering to do business […]
October 21, 2015
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Starting a Hedge Fund in Texas–Legal Considerations

The state of Texas has become one of the nation’s hubs for the alternative fund industry and has produced a number of internationally recognized funds.  In recent years, Texas has made significant changes to its regulation of hedge fund managers, easing […]
May 21, 2015
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Mark-to-Market Election for Hedge Funds

Section 475 of the tax code permits certain active traders to treat all investment transactions as generating ordinary income or loss.  Fund managers making a mark-to-market election recognize all gain or loss in open positions at year-end at the current fair market value as though they had been sold on December 31.  By recognizing all transactions as ordinary income a fund manager forfeits the ability to treat any assets as long-term capital gains.  Similarly, by marking portfolio assets to market at year-end, a manager loses the ability to defer income to later years.

May 2, 2015
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Using Intermediaries to Raise Capital

After the initial seed raise, many issuers find it difficult to locate sufficientaccredited investors to participate in the offering and turn to intermediaries. When using intermediaries, a company must (unless conducting a Rule 506(c) offering) ensure that the intermediaries follow the rules requiring substantive pre-existing relationships with any prospective investors, and avoid general advertising and solicitation.

April 5, 2015
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Key-Man Investment Fund Risk Mitigation

Successful hedge funds rely heavily on the intellect and expertise of key individuals, the loss of which can prove ruinous to hedge funds of all sizes. In November 2014, one of Europe’s largest money mangers, BlueBay, had to close a $1.4 billion fund because of the departure of a single key fund manager.

April 5, 2015
Domestic and Offshore Hedge Fund Structures

Domestic and Offshore Hedge Fund Structures

One of the initial considerations when structuring a hedge fund is whether to form the fund domestically, offshore or both. If a fund sponsor expects to have only U.S. investors, a domestic entity is sufficient. However, if a sponsor anticipates offshore investors or U.S. tax-exempt investors (IRAs, pension plans, endowments, etc.) an appropriate offshore fund will be needed to shield such investors from U.S. tax liability.
April 5, 2015
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Brief Survey of Common Hedge Fund Terms

As part of the hedge fund formation process, the attorney works closely with the fund sponsor to craft the terms to which the fund and its investors will be bound. When properly structured, hedge fund offering documents contain terms that adequately protect the fund sponsor and are attractive to investors.

April 5, 2015
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CFTC Grants Relief to Allow Limited Solicitation for CPO Hedge Funds

On September 23 of last year, the SEC adopted rules allowing private issuers of securities, including hedge funds, to engage in advertising and general solicitation under Regulation D. Until the recent CFTC announcement, hedge funds that include commodities or futures within their portfolios could not engage in general solicitation, since such instruments are regulated by the Commodities Futures Trading Commission (CFTC).

April 5, 2015
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Common Hedge Fund Strategies

Hedge fund strategies encompass a broad range of risk tolerance and investment philosophies within a wide array of  investments, including debt and equity securities, commodities, currencies, derivatives, real estate and other investment vehicles. The horizon of hedge fund investment strategies has seen unprecedented expansion in recent years.

April 5, 2015
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Hedge Fund Attorney

A team of experienced and committed hedge fund lawyers play a vital role in guiding hedge fund managers through their various responsibilities and helping managers avoid devastating mistakes.

Choosing the right legal team can mean the difference between an emerging hedge fund’s success or failure.

April 4, 2015
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Hedge Fund Prime Broker/Custodian

A prime broker is a central broker through whom the fund executes most or all of its trades and who typically acts as custodian to the fund’s assets. When the hedge fund executes trades through other brokers, the prime broker works with the executing brokers to settle and transfer all assets through the prime broker.

April 3, 2015
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Hedge Fund Documents

Your hedge fund attorney will prepare five core documents, which are necessary to launch the fund:

(i) a private placement memorandum, (ii) limited partnership agreement, (iii) subscription agreement, (iv) investment management agreement, and (v) management company operating agreement.

November 6, 2013
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Must a Hedge Fund Register as an Investment Advisor?

Not all hedge funds are subject to investment advisor registration. To determine whether a fund needs to register, we ask our clients the following four questions:

1.  Will the fund invest in “securities?”

2.  What will be the size of the fund?

3.  In what state is the fund management team physically located?

4. In what states will the investors be located?