What does a hedge fund attorney do for a start-up hedge fund? A hedge fund attorney is the first service provider a start-up hedge fund manager will likely contact.  The hedge fund attorney will listen to the manager and discuss the investment program.  From here the hedge fund attorney will [...]

Question: How much does it cost to establish a hedge fund? Answer: The costs of starting a hedge fund can vary considerably depending on the manager and the manager’s circumstances.  A start up hedge fund manager will need to consider the hedge fund start up costs which will include legal [...]

Many people talk about watching hedge funds through their 13F filings. A 13F filing is a quarterly report filed with the SEC by “institutional investment managers.” The reports include the name and number of the securities owned by the hedge fund. The term “institutional investment manager” means those managers who [...]

This question came to us yesterday: Question: What happens if a hedge fund doesn’t do proper diligence to ascertain that a client meets the qualified purchaser standards? Does the hedge fund have to register or notify the SEC? Answer: In practice I don’t know how this would happen unless someone [...]

As I’ve noted in many of my posts, I will try my best to answer your questions or point you to a post within the site which discusses the subject. Below is a common question for licensed brokers who are getting into the hedge fund industry. Question: I currently hold [...]

Hedge fund managers have to be especially aware of the ERISA rules with regard to their hedge fund and the investors in the fund. ERISA stands for the Employee Retirement Income Security Act of 1974 and it governs, among other things, pension investments into hedge funds.  The Department of Labor [...]

Question: What is a private equity fund?  What is the difference between a private equity fund and a hedge fund? Answer: For many people who are not familiar with the alternative investment industry, hedge funds and private equity funds look like the same thing.  The distinction is not necessarily in [...]

We have previously discussed the difference between a 3(c)(1) hedge fund and a 3(c)(7) hedge fund. Unlike a 3(c)(1) hedge fund where investors only generally need to be accredited investors and potentially qualified clients, all investors in a 3(c)(7) hedge fund must be “qualified purchasers.” A qualified purchaser is a [...]

Certain hedge fund managers need to be registered as investment advisors with the SEC or with the state securities commission of the state which they reside in.  For SEC-registered investment advisors, and most state registered advisors, the investors in their hedge fund will need to be “qualified clients” in addition [...]

Hedge fund managers can only admit certain investors into their hedge funds.  Most hedge funds are structured as private placements relying on the Regulation D 506 offering rules.  Under the Reg D rules, investors must generally be “accredited investors.”  Many hedge funds have additional requirements. With regard to individual investors, [...]