Forming A Hedge Fund

Definition of a Hedge Fund

A “hedge fund” is a private investment vehicle organized for the purpose of pooling investors’ assets. The sponsor of the hedge fund, commonly referred to as the hedge fund manager, invests the hedge fund’s assets pursuant to a predetermined investment strategy. It is argued that in the absence of such a pooling vehicle, an investor, on its own, would not be able to diversify its assets or have the resources to monitor, evaluate and implement the investing and trading strategies to be engaged in by the manager of the fund. Although, historically, the defining characteristic of a hedge fund was to “hedge” against market risk and volatility, hedge funds today utilize a variety of investment techniques. Unlike mutual funds, which are highly regulated, hedge funds: (i) are not required to redeem investors’ assets within seven days from the date on which it receives a notice for redemption from an investor; and (ii) may take illiquid positions without limitation and may engage in leveraged transactions with greater freedom.

Practice Contacts

Hedge Fund Investing

Hedge Fund Investing

Prior to entering into a relationship with a hedge fund manager, it is obviously important for the investors and service providers to conduct due diligence with regard to the managers background and current operation. The outline provided below is an overview of various issues that should be reviewed prior to entering into a relationship with a hedge fund manager. This outline is general in nature and does not purport to be complete or tailored to the circumstances of any specific manager or client. Prior to adopting any specific course of action in reliance on this article, we suggest that you contact legal counsel.

Raising Assets
Other Issues