OFFSHORE FUND FORMATION
Offshore jurisdictions provide tax-efficient solutions for managers seeking to raise capital from non-U.S. and tax-exempt U.S. investors. One of the initial considerations when structuring a hedge fund is whether to form the fund domestically, offshore, or both. A domestic entity is sufficient if a fund sponsor expects to have only U.S. investors. However, suppose a manager anticipates offshore or U.S. tax-exempt investors (IRAs, pension plans, endowments, etc.). In that case, an appropriate offshore fund will be needed to shield such investors from U.S. tax liability.
When properly structured, an offshore fund structure blocks offshore and tax-exempt U.S. investors from direct US tax liability. The most common offshore fund structures are the master feeder and side-by-side structures. Two of the most common offshore jurisdictions are the Cayman Islands and the British Virgin Islands (BVI).
We advise emerging and established fund managers on all aspects of offshore fund formation and ongoing operations. Our offshore fund services include structuring the offering terms, working with offshore counsel to prepare the disclosure documents and agreements, and required offshore formation and filing documents.
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 offshore fund services and customizable post-launch legal compliance program.
Below are reading materials that discuss offshore fund structures in more detail.
Domestic and Offshore Hedge Fund Structures
Forming and Operating a Hedge Fund
Schedule your complimentary consultation with one of our experienced attorneys to discuss the legal structure, regulatory requirements, timeline, and costs of forming an offshore fund.
Offshore 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.
Sample 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.