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Hedge Fund Documents

Your legal counsel will prepare six core documents, which are necessary to launch the fund: (i) a private placement memorandum, (ii) a limited partnership agreement, (iii) a subscription agreement, (iv) an investment management agreement, (v) a general partner operating agreement, and (vi) a management company operating agreement.

Other services and documents that are also generally completed include the formation services of the limited partnership, the management company, and the general partner; drafting the management company operating agreement; preparing and filing the Edgar registration; drafting and filing state and federal Form D notice filings; and as necessary, preparing and filing any state or federal registrations or exemptions (or other essential fund formation documentation).

Private Placement Memorandum

A private placement memorandum (“PPM”) is a securities disclosure document that provides investors with material information about the fund to enable an investor to make an informed investment decision. Similar to a prospectus in an initial public offering, a PPM provides potential investors with specific information about the fund structure, terms of the fund, the background of the management company, and other issues, such as potential risks of the strategy, market, investments, limitations, and more.

See our post: What’s in a Private Placement Memorandum? for more information about a PPM’s contents.

Limited Partnership Agreement

The limited partnership agreement (or in the case of an LLC-based fund, an operating agreement) is the legal governing document of the fund. The limited partnership agreement outlines the terms of the fund and rights of an investor and fund manager. In contrast with the private placement memorandum, which is written in plain English, the fund’s limited partnership agreement is a complex legal document. Among the terms of the limited partnership agreement are:

  • a description of the powers, activities, and compensation of the general partner and the management of the partnership;
  • a thorough discussion of all fees and expenses, including management fees, performance incentives, and other potential fees the fund will pay and, ultimately, the limited partners will indirectly or directly pay to the general partner, the fund manager, and other third parties;
  • an explanation of the allocations and distributions of profits and losses to all partners, including how profits and timing of redemption are calculated;
  • a description of investment capital requirements, withdrawal and redemption provisions, processes and requirements, including notice requirements, minimum and maximum withdrawal amounts, lock-up periods, gates, and distribution dates and processes, and any other pertinent terms; 
  • a description of the fund’s formation, purpose, term, and termination (whether voluntary or involuntary); 
  • a description of the fiscal year activities that will be completed, including reports, accounting activities, statements, audits (if any), balancing of the capital accounts, books and records; 
  • limitations of liability and indemnification provisions available to the limited partners, the general partner, and investment manager;
  • a designation of power of attorney, which authorizes the general partner to act on the limited partners’ behalf for such purposes as voting the fund’s securities, buying and selling fund investments, admissions of new limited partners, and amendments to fund formation documents and other documents necessary for continued fund activity;
  • and a description of any other items the fund will require of its partners.

To become a limited partner of a fund, an investor must sign a countersignature page by which it agrees to be bound by the terms of the partnership agreement or operating agreement, as necessary.

Subscription Documents

Subscription documents provide investors with a description of the steps necessary to purchase limited partnership interests in a fund and provide fund managers with eligibility information about the investor. This is the investor’s contract with the fund, which specifies the investor’s initial capital subscription amount and outlines under what terms the capital investment is being made. For fund managers, this document requires investors to attest that they meet certain eligibility standards, such as being an “accredited investor” or “qualified client,” as required by the Securities and Exchange Commission ("SEC") regulations and applicable state law in order to invest in the fund.

Investment Management Agreement

The investment management agreement is an agreement between the fund and the investment management company. It defines the services that a fund manager will provide in return for the compensation it will receive. It also assigns to the fund manager a power of attorney with the duty of advising the fund on its assets and any contributions made by the limited partners, and gives the fund manager the broad discretionary authority to manage investor funds and securities in a manner that the fund manager believes is consistent with the investment strategy of the fund. Since the fund manager and the general partner are usually controlled by the same individuals (i.e., the sponsors), the investment management agreement is likely to be signed by the same individuals on both sides.

Operating Agreements

(Management & General Partner Operating Agreements)

The operating agreements of the management company and general partner are the legal governing documents that provide all of the rights of the principals of the fund. Each document specifies how ownership and decisions of the general partner and management company are divided among its principals. The  operating agreements and their contents are not disclosed to investors but must be carefully drafted to remain in compliance with the governing laws.

Form D Filings & Other Registrations

In addition to the five core fund documents, there are required SEC and state filings, including form D filings and, in some cases, investment adviser registration and commodity pool operator registration with the Commodities Futures Trading Commission (CFTC).



Capital Fund Law Group has authored numerous investment fund publications, including instructive eBooks, white papers, blog posts, and sample offering document excerpts with illustrative footnotes. These complimentary downloads are dedicated to helping fund managers understand the legal fundamentals of launching and operating an investment fund.

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Hedge Fund Ebook
Hedge Fund Ebook