Higher Threshold for Performance Fee Proposed Under current SEC Rule 205-3, an SEC registered investment adviser can charge a performance fee (also called a performance allocation, incentive fee or incentive allocation) only to those investors who either has: a $1.5M net worth or at least $750,000 in assets with the [...]

Syndicated Post on Hedge Fund Fees I have recently come across a very good blog called Ten Seconds Into the Future by Bryan Goh of First Avenue Partners, a hedge fund seeder.  Bryan’s posts are very insightful and I recommend all managers take a look at his writings.  The post [...]

Overview of Hedge Fund Taxation The following is a reprint of the Joseph Bankman’s testimony before Congress.  Mr. Bankman is a professor at Stanford Law School.  While the testimony has a bias against the current hedge fund taxation structure, it provides a great overview of hedge fund tax issue, specifically [...]

Questions and discussions from Hedge Fund Law Blog readers I get quite a few questions from readers and usually I am able to answer these questions via email within a couple of days.  If you have any questions, comments or simply want more information on starting a hedge fund, please [...]

One of the problems with the securities laws in the United States is that there are two levels of rules to be cognizant of at any single time – the federal rules and the state level rules. For hedge fund managers that are registered as investment advisors with the SEC, [...]

The hedge fund performance fee (also known as the “performance allocation,” the “incentive allocation,” the “incentive fee,” among other aliases), is a periodic fee which is calculated as a percentage of any gains of a hedge fund over a predetermined period of time. The fee is normally taken on both [...]

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 [...]