Domestic Hedge Funds
U.S. domestic hedge funds continue to be one of the most popular investment vehicles for strategies targeting U.S. investors and even non-U.S. investors in various tax-friendly jurisdictions. Hedge fund vehicles provide a flexible structure that can accommodate a wide variety of investing and trading strategies across many U.S. and non-U.S. markets. Our domestic hedge fund formation services are designed to provide our clients with a robust, end-to-end solution to launch a U.S. private investment fund.
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. In each fund formation engagement that we undertake, our goal is to enable our client’s ultimate success by providing competent and effective support that exceeds expectations.
Formation & Launch Services
We routinely establish hedge fund structures and generally provide the following formation and launch services:
- Assisting fund managers to describe investment objectives, strategies and restrictions
- Advising sponsors with respect to fund structures, fee and liquidity terms, founder and preferred terms, tax matters, and valuation & reporting issues
- Reviewing collateral marketing material for compliance with applicable laws and for consistency with other market messaging
- Preparing definitive offering and governance materials, including private placement memoranda, partnership agreements, investment management agreements, and subscription documents
- Drafting and assisting to negotiate side letter agreements with institutional and other sophisticated investors
- Structuring joint-venture agreements, strategic relationship agreements, operating agreements and other documents between a fund sponsor, fund manager, and other strategic partners
- Advising on permissible and prohibited marketing practices in accordance with state and federal laws
- Handling Form D and state “blue sky” notice filings
- Assisting with necessary registrations and exemptions as it relates to state and federal regulators (including the SEC and CFTC)
- Recommending administrators, auditors, brokers and other service providers
- Facilitating other necessary advice and support to enable a smooth fund launch process
We prefer to stay on as counsel with our clients and support the growth of their investment management businesses by providing a host of ongoing services, including:
- Providing ongoing advice and regulatory support
- Advising on investment allocation issues, valuation matters, investor qualifications, regulatory filing obligations, insider trading issues, and other continuing matters
- Reviewing investor updates, communication, and correspondence
- Assisting with updates and amendments to fund offering and governance documents
- Consulting on compliance and operational matters related to developments in applicable laws and markets
- Handling Form D and state “blue sky” notice filings
- Advising on marketing, solicitation, and broker-dealer issues
- Providing transactional support for acquisitions and other portfolio investment transactions
- Representing clients in relation to regulatory examinations and compliance matters
Incubator Hedge Funds
Incubator funds provide investment managers and traders with a cost-effective stepping stone toward launching a full-fledged hedge fund. Our attorneys developed the concept of the incubator hedge fund and we continue to innovate the structure, assisting our clients as they explore the limits of what incubator funds can do.
The incubator phase allows a prospective hedge fund manager to:
- develop a marketable track record in the fund vehicle
- make important operational and business decisions pre-launch
- determine investor interest and receive feedback on the proposed fund structure
- construct the timeline and milestones for a successful fund launch
We offer the most comprehensive incubator fund formation services available with professional setup fees that are highly competitive.
Learn more about incubator hedge funds below.
The Incubator Phase
During the incubator phase our clients generally focus on the following objectives:
- Implementing the investment strategy in live trading in the fund’s account
- Refining trading processes and investment parameters
- Developing collateral marketing material including a “pitch book” and “tear sheet”
- Soft-circling indications of interest from would-be investors
- Gathering feedback on the fund structure, fees and liquidity terms
- Selecting service providers and filling out operational roles
We generally provide the services below in the course of establishing incubator hedge fund structures:
- Reviewing the availability of names for and establishing the entities that will serve as the fund and management company
- Preparing the core legal and governance documents for the incubator fund to memorialize capital contributions, allocate profits and losses, and provide for other fund administration
- Advising on state and federal laws at play based on each client’s specific circumstances
- Preparing a disclaimer for the presentation of the fund’s track record
- Reviewing collateral marketing material used to gather indications of interest from investors
- Assisting to determine the ultimate fund structure and terms to be offered to investors
- Recommending vendors and service providers to assist in managing a full-fledged fund
- Providing ongoing support and consultation throughout the incubator phase
Offshore Hedge Funds
Offshore funds and master-feeder hedge fund structures enable sponsors to target diverse capital sources including U.S. tax-exempt investors and non-U.S. investors that may have a preference to access U.S. strategies through offshore fund vehicles. Our offshore hedge fund formation services provide our clients with a complete solution to start a hedge fund domiciled in any preferred offshore jurisdiction.
While offshore funds provide sponsors with greater flexibility to raise capital from different investors, offshore funds also present a range of complicated formation and regulatory issues separate from those facing domestic hedge fund sponsors. We assist clients in choosing the best jurisdiction for their offshore fund structure and we assist to devise and execute a plan to maximize the available benefits.