FAQs

Historically, hedge funds have been prohibited from conducting any public offering by Rule 502(c) of Regulation D, which prohibited all forms of general solicitation and advertising. However, the JOBS Act…

Hedge fund managers are often regulated by the state in which the hedge fund manager conducts business or by the SEC, depending on the manager’s assets under management (known as…

Most hedge funds raise money through a private offering exemption under Regulation D of the Securities Act of 1933. Although Reg. D prohibits general advertising, fund managers do distribute certain…

For a 3(c)(1) fund (or a 3(c)(7) fund) to invest in another 3(c)(1) fund and only be counted as 1 owner for the purposes of the 100 beneficial owner limitation,…

Hedge funds are private investment funds known for their lightly regulated nature, use of leverage and short-selling, structural flexibility, and varied investment mandates. Hedge funds are also characterized by the…

It is not uncommon for a hedge fund to have multiple managers who share the responsibilities of running the fund. Multiple managers may execute different strategies or may operate in…

If you can avoid state registration through the use of exemptions then you may not have to take any exams to run your hedge fund. However, if you have to…

Investment advisors, including hedge fund managers, are subject to new registration and reporting requirements as a result of changes implemented by the Dodd-Frank Wall Street Reform and Consumer Protection Act…

Lock-up provisions restrict an investor’s ability to withdraw capital from a hedge fund for some stated period of time. Traditionally, it was common for hedge funds to lock-up an investor’s…

Hedge funds and mutual funds are both pooled investment vehicles that invest primarily in securities and commodities. However, mutual funds are subject to far more government regulation than hedge funds….

Hedge funds are typically structured as limited partnerships (LPs) or limited liability companies (LLCs). Both LPs and LLCs are taxed as partnerships by default, which means that they are pass-through…

Yes, hedge funds are extremely flexible vehicles and are used by investment managers to pursue strategies across many different asset classes, include liquid and illiquid investments. Hedge funds that trade…

The CFTC regulates all the futures, foreign currency (“forex”), and swap markets, including options and other derivatives related to the foregoing. If you plan to trade futures, forex, swaps, or…

Hedge fund managers typically charge an asset management fee based on the fund’s net assets, along with a performance-based fee structured as a share of the fund’s capital appreciation. The…

Hedge funds accept investors based on many considerations, including: wealth, sophistication, ability to absorb losses, tax status, citizenship, and more. Hedge funds must choose investors carefully because the exemption from…

Hedge funds raise money from individual and institutional investors who contribute capital in exchange for interests in the fund entity. Because hedge funds are generally prohibited from using any public…

Offshore funds are typically created by hedge fund managers that have an expectation of receiving significant capital contributions from investors located outside of the United States. Offshore funds are also…

Interests in a hedge fund are securities and, as such, the manager of a hedge fund is undertaking a securities offering when offering and selling interests in the fund to…

The most important features of a hedge fund structure are pass-through tax treatment and limited personal liability for the managers and partners. The appropriate vehicles in the U.S. to deliver…

No. Rule 3c-5 under the Investment Company Act of 1940 provides that knowledgeable employees of a 3(c)(1) fund do not count toward the 100 beneficial owner limitation. The term “knowledgeable…