Types Of Hedge Funds And Their Characters
It is not the numerous questions that are the problem with writing on topics like how to set up a hedge fund but it is the many possible answers to every question that troubles one the most. As a matter of fact answers to most questions related with starting a hedge fund leads to yet another question. In this article we will discuss and describe how to set up a hedge fund business but this can hardly be done without referring to the hedge fund managers and also the organization and structure of these funds.
Before you plan to start a hedge fund for making huge money in no time you need to understand that you will be entering a market that is already a more than a couple of decades old which has become a lot more sophisticated compared to the initial days when things were certainly a lot easier. Investors too are a lot more demanding now as the industry is now almost completely taken over by institutional investors replacing the individual high net worth investors. This particular change has made it all the more important for prospective hedge fund managers to take great care at the time of establishing their funds.
While discussing about how to start a hedge fund it must be clarified first whether it would be an onshore or offshore fund. The kind of fund is basically dependent on the tax status of the investors. If you are planning to start a hedge fund with US tax payers you need to have a structure that will allow them to look through the various investment activities of the fund so that they can efficiently fulfill their tax reporting and taxpaying obligations with complete clarity. On the other hand offshore funds are actually vehicles for making open ended investments which usually issue shares and are also limited to capital gains upon liquidation of those shares.
Moreover most offshore hedge funds are tax-exempt vehicles that mean, it is the institutional investor who is actually responsible for paying the taxes. Offshore funds are for attracting non-US investors who are mostly reluctant to invest in US funds, for they are presumably scared of their affairs being scrutinized by the United States authorities. For starting a hedge fund you must also understand that to US tax exempt investors offshore funds are more appealing choice as this type of hedge funds allows them to avoid Unrelated Business Income Tax – a problem that is often created by leverage. While deciding on how to start your own hedge fund you can also consider Master Feeder Funds in which a hedge fund manager is required to manage only a single portfolio and the structure of this type of funds is also naturally quite simple though there can be several variations. Characteristically Master Feeder Funds are only simple trading companies as there are only two shareholders with the only specific requirement of using partnership accounting. Master Feeder Funds have several other advantages too and if you want to learn about them you can visit Riveleslawgroup.com.
About The Author
Leon McNiel is a financial expert who also likes to write many interesting articles and blogs, helping people understand the nuances and legal aspects of concepts like how to start a hedge fund, private equity funds and more. He recommends RivelesLawGroup.com as the best name to trust or credible information and support on these issues.