questions for lawyer when setting up hedge fund

Ask your attorney about past experiences with raising capital. Venture capitalists like seeing familiar faces. An attorney without prior experience in raising capital or on the venture side of funding may fall short when you need financial security. Despite the widely held thought that all attorneys know all areas of the law, we really do not.

Full Answer

How difficult is it to start a hedge fund firm?

The complexity of starting a hedge fund firm is dependent upon the number of investors invested in the fund, the amount of assets under management, and the complexity of the hedge fund’s strategy for investors. There are a few hoops and hurdles to establishing a hedge fund firm in the United States, but these are easily understood.

Should I name my firm in an interview at a hedge fund?

However, avoid telling a hedge fund that you are interviewing at an accounting firm, management consulting firm, etc. You want to appear highly focused on hedge funds. The bottom line is that you should name firms similar to the one you are currently interviewing with. I have been lucky to get interviews at some other great hedge funds.

How many questions are in the hedge fund hiring guide?

Our guide features a total of 40 of the most common technical, behavioral, and logical questions, along with proven sample answers, that are asked by hedge funds professionals to candidates during the hiring process.

How is a hedge fund set up?

Typically the hedge fund is set up as a General Partnership, with a limited liability company acting as the funds General Partner.

What does a lawyer at a hedge fund do?

Hedge fund lawyers provide a variety of legal services to hedge funds—ranging from assistance with fund formation and intellectual property, to regulatory compliance and securities regulation, tax and real estate issues, and litigation and dispute resolution.

What are the legal requirements to start a hedge fund?

What Is a Hedge Fund?File the Articles of Incorporation for the Hedge Fund Firm.Write the Hedge Fund Firm's Corporate Bylaws.Register the Company as an Investment Advisor.Register the Hedge Fund Firm's Representatives as an Investment Advisor.Register the Hedge Fund Offering with the SEC.More items...

What do you need to know before applying at a hedge fund company?

Here are some of them:Quantitative experience. ... Education. ... Something extra. ... CFA, CAIA or Chartered Hedge Fund Associate (CHA) designations look good on a resume.High-quality references from your past few jobs, especially if they're in finance, help.More items...

What questions should I ask a hedge fund manager?

Hedge Fund Interview Questions (Behavioral)Tell me about yourself. ... Why do you want to work for a hedge fund?Do you have an industry preference?What do you plan to do in the next 5-10 years?Have you had a performance review? ... What skills do you feel are transferable to this industry?More items...

Can anybody start a hedge fund?

Yes, you could start with much less capital, or go through a hedge fund incubator, or use a “friends and family” approach, or target only high-net-worth individuals. But if you start with, say, $5 million, you will not have enough to pay yourself anything, hire others, or even cover administrative costs.

Do you need a Series 7 to start a hedge fund?

Licensing Requirements for Hedge Fund Managers The only universal license requirement for a hedge fund manager is an ordinary business license. Because hedge fund managers are not regulated as brokers, they do not usually need the Series 7 license unless they engage in trading on behalf of customers.

How do I start a hedge fund with no experience?

0:0218:57How to Start a Hedge Fund (even if you have NO experience) - YouTubeYouTubeStart of suggested clipEnd of suggested clipAnd setup in order to process data where are you getting your data from be able to turn that dataMoreAnd setup in order to process data where are you getting your data from be able to turn that data into actionable strategies signals is what we call them in the marketplace.

What is hedge fund interview questions and answers?

9 Interview Questions Hedge Funds Ask (and How to Answer Them)What is a hedge fund? ... Why would you want to work for a hedge fund and not a mutual fund? ... What makes hedge funds different? ... What is convertible arbitrage? ... What does it mean when a manager says that he is event-driven? ... What is the strategy of our fund?More items...•

What skills do you need to be in hedge funds?

Skills Required in Hedge fund Jobs.High intellect.Confidence.Competitive.Strong domain knowledge.Consistency and accuracy.Deep investing and finance knowledge.Financial Modeling Skills.Strong quantitative and legal skills.

How do you prepare for a hedge fund case study?

Take-Home Case Study: How to PrepareRead the “Business Overview” section of the company's 10-K.Read at least 2 sell-side initiation reports.Read the last 2 years worth of press releases via the company's website.Read the last 6 months worth of sell-side equity research.More items...

Do hedge funds have trustees?

In the investment context, paramount is the rule that trustees must use reasonable care and skill in deciding how their portfolio is to be invested and whether, within that investment strategy, there is room for investment in a hedge fund. Trustees will be told that risk and reward increase together.

What should I expect at a hedge fund interview?

Hedge fund interviews are mostly about one thing: your stock or other investment pitches. Yes, they could ask about other topics, such as standard “fit” questions, technical questions, your views on the market, your resume walkthrough, and more.

Which jurisdiction is the most popular for offshore funds?

Historically, the most popular jurisdiction for offshore funds established by US HFMs has been the Cayman Islands, closely followed by the British Virgin Islands and Bermuda -- and in the dim past the Bahamas. These, together with the British offshore centres in the Channel Islands and the Isle of Man, have been deemed to be lightly regulated and in the past that was largely their main attraction.

What is a master feeder fund?

There are several variations of structures, but the one I personally prefer is what I call the "Triangular Master Feeder Fund". This means that a Master Fund is established, which can be just a simple trading company, into which the US Fund invests from onshore and the Offshore Fund also invests - both of these are deemed "Feeder Funds". The Master Fund need only be a simple trading company, because it will only have two shareholders. The only specific requirement that will be imposed upon the Master Fund is that it maintains its books using partnership accounting so that it is able to provide reports to the US Fund, which will enable its investors to comply with tax reporting requirements and produce their K1's efficiently.

How long does it take to get into a hedge fund after it is established?

In the second stage, generally six to twelve months after establishment, the PPM is circulated and investors can be brought into the fund. The incubator method affords the opportunity for skilled traders to break down the hedge fund development process into a manageable undertaking.

What are hedge funds governed by?

Hedge funds and the investment advisers managing them are governed by a variety of securities laws and a number of regulators. The marketing of interests in a hedge fund is regarded as a securities offering under the Securities Act of 1933 (the “1933 Act”). The manager of the fund, as an investment adviser, is governed by the Investment Advisers Act of 1940 (the “Advisers Act”). And the Fund itself is subject to the Investment Company Act of 1940 (the “Company Act”). Absent exemptions under these securities laws, the offering, manager and fund would have to be registered with the SEC – a costly and time consuming process. Fortunately, exemptions under these laws allow both the offering and the fund to avoid the cost, administrative burden and disclosure requirements imposed by registration. Additionally, the manager to one or more private funds may avoid SEC registration if it advises private funds with less than $150 million under management. Each state also has its own laws relating to the offering of hedge fund interests and the registration of the manager, which will also need to be navigated.

What is hedge fund regulation?

Regulation of the Fund: The fund itself is regulated under the Company Act, which requires the registration of any “investment company.”. Hedge funds have obtained exemption from registration under Section 3 (c) (1) and 3 (c) (7) of the Act as private funds.

What are the variables that determine the structure and domicile of a hedge fund?

The structure and domicile of a hedge fund is primarily dependent on two variables: (i) the tax status and residency of its prospective investors; and (ii) the investment strategy employed by the manager.

What is a qualified purchaser?

A qualified purchaser is any person with not less than $5 million in investments or any institutional investor with not less than $25 million in investments. Regulation of Performance Fees: The imposition of hedge fund performance fees are regulated at the federal and state level.

What is Rule 230 M?

Rule 230 (m) provides a safe harbor from SEC registration to any adviser who solely advises private funds and has assets under management of less than $150 million. As will be discussed, a private fund is a one falling under the provisions of Section 3 (c) (1) or 3 (c) (7) of the Company Act.

Is a hedge fund a domestic or foreign company?

When dealing with U.S. citizens or U.S. taxable investors, a hedge fund can be constructed as a single U.S. domestic hedge fund. Typically the hedge fund is set up as a General Partnership, with a limited liability company acting as the funds General Partner. This provides the advantage of limited liability for the investors and its managers ...

Why did hedge funds start?

The hedge fund industry started in the US and initially grew because of the involvement of enlightened high net worth investors, supporting a growing band of very smart traders.

What is the Master Fund's requirement?

The only specific requirement that will be imposed upon the Master Fund is that it maintains its books using partnership accounting so that it is able to provide reports to the US Fund, which will enable its investors to comply with tax reporting requirements and produce their K1's efficiently.

What is a master feeder fund?

There are several variations of structures, but the one I personally prefer is what I call the "Triangular Master Feeder Fund". This means that a Master Fund is established, which can be just a simple trading company, into which the US Fund invests from onshore and the Offshore Fund also invests - both of these are deemed "Feeder Funds". The Master Fund need only be a simple trading company, because it will only have two shareholders. The only specific requirement that will be imposed upon the Master Fund is that it maintains its books using partnership accounting so that it is able to provide reports to the US Fund, which will enable its investors to comply with tax reporting requirements and produce their K1's efficiently.

Why do US tax payers want US funds?

Certainly US tax payers will want a US Fund to enable them to 'look through' the investment activities of their fund so that they can complete their K1's and fulfil their tax reporting (and tax paying) obligations efficiently and with full clarity.

Which jurisdiction is the most popular for offshore funds?

Historically, the most popular jurisdiction for offshore funds established by US HFMs has been the Cayman Islands, closely followed by the British Virgin Islands and Bermuda -- and in the dim past the Bahamas. These, together with the British offshore centres in the Channel Islands and the Isle of Man, have been deemed to be lightly regulated and in the past that was largely their main attraction.

Why is it important to have a good attorney?

Historically, a good attorney has helped fund promoters, not only with regard to tax efficiency and the structure and jurisdiction selected, but also by ensuring that the documentation avoids potential risk of litigation.

Can hedge funds be used in UCITS?

It is obvious that many hedge fund strategies cannot be used in a UCITS; nevertheless there has been a very strong demand for UCITS funds by HFMs and other fund promoters. It is also a widely held belief that because it has a higher standard of regulation UCITS are safer, forgetting that at least two UCITS were decimated by Madoff.

Why is it so hard to understand hedge funds?

Another reason is that since hedge funds can involve multiple and complex strategies to maximize their returns, it will be difficult for investors to understand and keep track of them.

What is a hedge fund?

Answer: It is a fund which in turn invests further in other hedge funds. The benefit here is that an investor will get the flavor of multiple hedge fund strategies and diversification. They are structured as a limited partnership that offers the advantage of limited liabilities to the investors.

What is mutual fund?

Mutual Funds A mutual fund is an investment fund that investors professionally manage by pooling money from multiple investors to initiate investment in securities individually held to provide greater diversification, long term gains and lower level of risks. read more.

What is subscription in hedge fund?

Answer: Subscription refers to the investment amount made by an investor to be a part of the hedge fund. Redemption, on the other hand, is the amount that is liquidated and paid back to the investor on account of exiting the hedge fund or liquidation of the fund.

What is an offering memo?

Answer: An Offering Memorandum is like the Prospectus of a Hedge Fund. It is a legal document that will state the objectives of the hedge fund, risks, terms, and conditions of the fund. All the details are minutely stated in the OM.

What is master feeder fund?

Answer: A master-feeder fund is a standard structure utilized by the funds for pooling taxable and non-taxable investments raised into a centralized vehicle known as a Master Fund. Thus, the assets are made into separate Feeder funds; one is for the US-based investors, and the other is for the non-US based investors.

What is domestic fund structure?

Answer: The entities included in a domestic fund structure are: A Limited partnership as the entity of the fund. An LLC (Limited Liability Company) to act as an Investment Manager and General Partner. It is formed in the jurisdiction of the fund sponsor.

Why do hedge fund lawyers help?

An experienced hedge fund lawyer can help you avoid pitfalls and build relationships and bring you into networking events such as private-capital introduction dinners. It will also show others in the industry that you are investing in your own business because you aim to be in the industry for the long haul.

What should be included in a hedge fund bylaws?

At a minimum, the hedge fund firm’s bylaws should include a mission statement, a compliance manual, an ethical code of conduct, a manual for supervisory procedures, and an advisor portfolio management agreement.

What is hedge fund?

The term hedge fund refers to any type of private investment company that is operating under certain exemptions from registration requirements under the Securities Act of 1933 and the Investment Company Act of 1940. 1  (Ironically, hedge funds may use investment strategies that have nothing to do with hedging.)

How to establish a legal partnership?

In order to establish a legal partnership, the company must register as an investment advisor. Do this by going to the Investment Adviser Registration Depository ( IARD) website. This process is free and can be completed over the internet. 5 

Is a hedge fund a limited partnership?

The hedge fund is typically set up as either a limited partnership (LP) or limited liability corporation (LLC). In comparison, a general investment manager can be set up any type of business structure that meets the needs of the investment manager.

Is it easier to start a hedge fund?

Given these exemptions, it is much easier to start a hedge fund firm rather than a firm that manages more highly regulated investment options such as mutual funds. 2  The relaxed restrictions for hedge funds have helped bolster the growth of the hedge fund industry.

Can hedge funds be marketed to the general public?

In the United States, hedge funds can be legally marketed to investors that satisfy certain standards of sophistication. 12  In addition, hedge funds can be marketed to the general public, provided all purchasers are accredited investors and certain other conditions are met. According to the SEC, an issuer cannot rely on both Rule 506 (b) ...

Perfecting Your Entry

There are no excuses for not perfecting what is in your control. Irrespective of the fund, the position, or the region, you can be sure this question will be asked as it's a standard in the finance industry.

15 Common Hedge Fund Technical Questions

Technical questions are a critical component of almost every hedge fund recruiting process. Accordingly, your interviewers will expect detailed and accurate responses to commonly asked technical questions, and your answers must demonstrate in-depth knowledge and expertise of the topic at hand.

WSO Bonus Questions - Market Trends

Having knowledge and expertise in the public financial markets is inevitably a prerequisite for a successful career at a hedge fund. Given this, you should know that your interviewers will undoubtedly ask you questions related to markets, ranging from their history to the current trends.

8 Firm-Specific Hard Technical Questions

Having the ability to correctly answer all 15 technical questions covered above is undoubtedly a great way to distinguish yourself as a strong candidate from the pool of thousands of hedge fund applicants.

Did you know?

The following questions have been taken from WSO's company database, which is sourced from the detailed experiences of more than 30,000 candidates with hedge funds interviews. The Hedge Fund Interview Course includes over 800 questions across 165 hedge funds (no other resource comes close).

The Stock Pitch

The stock pitch is always a staple of the HF interview, and you should prepare accordingly. It is best to go prepared with one long idea and one short idea, as demonstrating that you understand the nuances of shorting is a great way to differentiate yourself from other candidates.

5 Logical Puzzles - HF Interview Brain Teasers

Logical puzzles, brainteasers, and riddles are an important part of the interview process as they allow the interviewer to determine your critical thinking abilities.

Tax Considerations

Master-Feeder Funds

Advisors

Jurisdiction - Onshore

Jurisdiction - Offshore

Attitude to Regulations

EU AIFM Directive

UCITS

Non- UCITS Funds

Structuring The Fund

• There are certain things that must be done and decisions that must be made before either the prospective HFM starts working on any of the above or the Fund can be set up. These include, inter alia: 1. Firstly the HFM must prepare a detailed business plan so he/she can calculate what the initial establishment costs are for the Investment Manager, tw...

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