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Domestic Hedge Funds

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Domestic Hedge Fund Formation

Managers expecting to raise capital primarily from U.S. investors will generally form a domestic hedge fund if they are looking to manage money in a pooled vehicle. Our domestic hedge fund formation services are designed to provide our clients with all the tools to launch efficiently, with robust legal support.

Domestic hedge funds provide a versatile structure to manage capital across a variety of asset classes. Prospective managers looking to start a hedge fund face numerous challenges as they attempt to create a product that will deliver attractive returns and gain attention from willing investors. Our goal in a domestic hedge fund formation engagement is to provide our clients with all the tools to launch successfully.

We provide the following services in connection with the formation and launch of domestic hedge funds:

  • Assist hedge fund managers in describing investment objectives and defining risks associated with those objectives
  • Prepare Private Offering Memorandum (Private Placement Memorandum), Limited Partnership Agreement and/or Operating Agreement, and Subscription Documentation for hedge funds
  • Advise regarding fund structure, compensation structure, liquidity terms, valuation procedures, and subscription methods
  • Prepare Investment Advisory Contract between investment manager and domestic hedge fund
  • Review Custody Agreement and/or prime broker agreements with broker-dealers
  • Provide advice related to marketing domestic hedge funds in compliance with Regulation D private offering exemption (general solicitation and general advertising issues)
  • Advise regarding state and federal laws affecting hedge funds including broker-dealer regulations, ERISA, the Commodity Exchange Act, tax matters, the Investment Advisors Act of 1940 and the Investment Company Act of 1940
  • Prepare SEC Form D and “blue sky” filings on an ongoing basis for hedge funds
  • Structuring hedge funds to be tax-efficient to the general partner and key personnel
  • Assist hedge fund managers with SEC and State investment advisor registration
  • Assist in establishing relationships with hedge fund administrators, accountants, custodians, prime brokers and other service providers
  • Provide other necessary advice and support to start a hedge fund in a timely manner

 

We can provide the following services to our domestic hedge fund clients on an ongoing basis:

  • Prepare investor correspondence on behalf of hedge funds
  • Provide updates on events, new laws and regulations that impact hedge fund formation and operations
  • Advise regarding SEC, CFTC and tax matters affecting hedge funds
  • Advise regarding hedge fund investor qualifications
  • Ensure compliance for hedge funds with state “blue sky” laws
  • Ensure compliance with FINRA rules for hedge funds affiliated with a broker-dealer
  • Represent hedge funds and hedge fund managers in arbitrations and investigations, including SEC, FINRA, and stock exchange matters

 

In addition, we have advised domestic hedge fund clients on the following issues:

  • Marketing a hedge fund, including marketing on the Internet, without violating the prohibition on general solicitation and general advertising
  • Compensating third-party marketers and brokers who assist in raising capital for hedge funds
  • Using soft dollars to pay for services utilized by hedge funds
  • Compiling a track record based on past performance of managed accounts that is AIMR and SEC compliant
  • Operating a hedge fund that is affiliated with a broker-dealer
  • Publishing an investment newsletter and operating a hedge fund
  • “Best execution” issues that arise with multiple hedge funds and/or separate managed accounts
  • Trading hot issues if some investors fall into the “restricted persons” category
  • Establishing an offshore hedge fund feeder, taxable as a corporation for U.S. federal income tax purposes, for investment by certain categories of investors (such as tax exempt or non-U.S. investors)
  • Structuring hedge fund management and performance fees to ensure compliance with regulatory requirements, including the Investment Advisors Act of 1940 and ERISA regulations
  • Complying with ERISA regulations including the 25% Plan Asset Limit

 


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