Capital introduction is the term used to describe investor referrals to hedge funds by prime brokers. Many prime brokers and even mini-prime brokers will provide capital introduction services to their customers. Typically this is done as a favor to the hedge fund and does not carry the high costs of a third party marketer. However, unlike a third party marketer, the prime broker is probably not actively looking for investors for the fund and therefore actual capital introductions may be rare, depending on a number of factors including the individual broker and the investment strategy.
Hedge funds which receive introductions from their prime brokers will need to independently verify that all investors properly complete the hedge fund subscription agreement and meet all investor qualification requirements.
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