Digital Asset Funds
DIGITAL ASSET FUND FORMATION
Digital asset hedge fund managers use a broad range of fundamental and quantitative strategies, which can be roughly divided into the following categories: index and token-specific funds, long-only funds, algorithmic quant funds, and node funds. Moreover, in addition to investing directly in crypto-asset tokens, funds can invest indirectly, using options and futures and through income-generating assets inherent in the underlying technology. Hedge funds can also invest in liquid securities issued by public companies that hold crypto assets. Still, for the most part, equity investment is limited to venture capital and private equity funds, given the illiquid nature of most crypto-asset companies.
The regulation of cryptocurrency fund managers heavily depends on how digital assets are classified. In early analysis, US government regulatory bodies often categorized digital assets differently. US regulatory bodies overseeing digital asset fund managers include the SEC, the CFTC, the IRS, and Fincen.
Digital asset fund managers face substantial risk in disclosing their investment fund strategy and have limited precedent in preparing those disclosures. As an emerging asset concept, distributed ledger technology presents a myriad of potential regulatory considerations, technological complexities, and market uncertainties with few analogous instruments. As with any fund offering disclosure, digital asset fund managers are advised to err on the side of thoroughness and caution in disclosing the breadth of the investment strategy and its potential risks.
EXPERIENCED LEGAL COUNSEL & FLAT-FEE SERVICES
At Capital Fund Law Group, we focus our expertise and knowledge on investment advisory services, fund formation, securities law, corporate law, and taxation. Our client-tailored flat fee will take you from start to finish, assuring no unexpected, hidden charges during the formation process.
We concentrate our expertise on your specific legal needs, which may include various factors, such as structure, strategy, and terms. Our attorneys welcome an initial consultation to discuss your investment goals. During your consultation, we will detail our digital-asset fund services and customizable post-launch legal compliance program.
Cryptocurrency Asset Classification Overview
Cryptocurrency Hedge Fund Risk Disclosure
Common Hedge Fund Strategies
Schedule your complimentary consultation with one of our experienced attorneys to discuss the legal structure, regulatory requirements, timeline, and costs of forming a digital-asset fund.
Digital-Asset Fund Resources
Information & Downloads
Forming & Operating a Hedge Fund | by John S. Lore, Esq.
Written by John S. Lore, Esq., managing partner and shareholder of Capital Fund Law Group, Forming & Operating a Hedge Fund is a brief guide for emerging fund managers. Click the button below to view and download the eBook on a mobile or desktop device.
This book provides a concise guide through the process of structuring, launching and raising capital for domestic and offshore hedge funds and other private investment funds. Throughout this book, we highlight pitfalls that fund sponsors should watch for and suggest best practices to safely and effectively navigate the process of forming and operating a fund.
Example Hedge Fund PPM Excerpt | by John S. Lore, Esq.
This is a brief excerpt of a sample hedge fund Private Placement Memorandum (PPM) with footnoted explanations of the PPM provisions.
The PPM is based on a fictitious master-feeder hedge fund using a global fixed-income arbitrage strategy. The accompanying explanations discuss the reasons behind certain disclosure language as well as a more detailed examination of certain fund topics and how they apply to the disclosure document.
The excerpt also provides drafting tips, best practices recommendations, potential pitfalls and common mistakes in hedge fund PPMs.
Hedge Fund Structural Considerations | by John S. Lore, Esq.
Emerging hedge fund managers face a labyrinth of regulatory and tax considerations, investor reporting requirements, and business operation issues. Managers must also balance investor relationships, capital raising, developing their investment strategies, and a myriad of other roles. Operating a hedge fund entails significant legal exposure, with substantial liability for improper disclosure. Even inadvertent mistakes can lead to substantial personal liability.
The structure of a hedge fund is dependent on a number of tax, regulatory, and financial considerations. Fund structure is also driven in large part by the fund’s strategy, such as the degree of liquidity of the portfolio investments. The fund structure should be developed based on careful and thorough analysis with the assistance of an experienced fund attorney.