A common question from start-up hedge fund managers is what kind of a website can I have and how do I go about getting investors through an internet solicitation? The unfortunate answer is that hedge fund managers must be very careful when they are designing their website. In general, websites [...]

The term “blue sky laws” refers, generically, to any of the securities laws of the individual states.  Each state has a set of laws on its books dealing with securities.  These laws have many similarities to the securities laws at the federal level (the Securities Act of 1933, the Securities [...]

The goal of many hedge funds is to reach a point where they can start attracting investments from institutional investors. Many hedge funds (especially those with pedigreed managers) are able to start with backing from institutional investors while others (including many start up hedge funds) will need to develop a [...]

Question: What is the hedge fund high watermark? Answer: The hedge fund high watermark is a mechanism that is implemented to make sure that managers do not take a performance fee when the fund has had negative performance over previous performance fee periods. The high watermark is the colloquial term [...]

Question: does my commodity/futures trading firm need to register as a CTA? Answer: Generally Section 6m(1) of the Commodities Exchange Act (“CEA”) requires that any person (or firm) which falls within the definition of a CTA be registered as such. Section 6m(1) of the CEA states: “It shall be unlawful [...]

Question: What licenses do you need to start or manage a hedge fund? Answer: This is a question that comes up quite often. Many people wonder whether they need a series 7 license or the series 65 license or the series 3 to manage a hedge fund. First, a potential [...]

In short, hedge funds are pooled investment vehicles. That is, a hedge fund is a company which pools money from its investors (owners) and makes investments pursuant to the fund’s stated investment objective. There are many different types of hedge funds, which can invest in everything from stocks and bonds [...]

Question: What costs does a hedge fund pay for and what costs does the hedge fund management company pay for? Answer: This is another very common question. Most hedge fund offering documents provide a boilerplate approach for splitting costs between the hedge fund and the management company. The general rule [...]

Question: Should a start-up hedge fund have an audit? Answer: This is a question which we will get very often for funds that aim to launch on July 1 or later.  While there is generally no legal requirement for a hedge fund to have their performance results audited, a vast [...]

Question: Do I need to open a bank account for the management company and/or the hedge fund? How do I open a brokerage account for my fund? Answer: This is a question I will get at least once per week. First, you will need to establish a bank account for [...]