Key Considerations in Structuring a Hedge Fund

Size: px

Start display at page:

Download "Key Considerations in Structuring a Hedge Fund"

Melina Douglas
9 years ago
Views:

1 June 25, 2015 Key Considerations in Structuring a Hedge Fund An overview of common fund structures and marketing 2015 Dechert LLP

2 Corporate Investors Corporate Assets June 25,

3 Partnership Investors Partnership Assets 3

4 Types of Investors Non-U.S. Investors, including continental European investors U.S. tax-exempt investors qualified pension and profit-sharing plans individual retirement accounts endowments of educational institutions U.S. taxpayers U.S. resident individuals treasuries of U.S. companies 4

tax-exempt investors qualified pension and profit-sharing plans

5 Master-Feeder Structure Non-U.S. investors/ U.S. tax exempt U.S. taxpaying investors Corporate Feeder Partnership Feeder Partnership/ Corporate Master Assets 5

6 Marketing in the U.S. Section 3 of the Investment Company Act of 1940 definition of investment company Private funds generally rely on one of two exceptions from the definition of investment company : Section 3(c)(1) Accredited Investor Slot counting (100 beneficial owner limit) Section 3(c)(7) Accredited Investor Qualified Purchasers 6

Private funds generally rely on one of two exceptions from the definition of

7 Marketing in the U.S. Regulation D Securities Act Two non-exclusive safe harbors for private placements that qualify for the private placement exemption under Section 4(a)(2) of the Securities Act: Rule 506(b) Rule 506(c) The Jumpstart Our Business Startups Act ( JOBS Act ) Created the Rule 506(c) safe harbor, which permits in certain circumstances the use of general solicitation and general advertising to promote a private placement. 7

private placement exemption under Section 4(a)(2) of the Securities Act: Rule 506(b) Rule 506(c) The

8 Marketing in the U.S. Pre-Existing Relationship Rule 502(d) Resale Restrictions Capital Raising and Advertisement Issues Anti-Fraud Provisions under the Advisers Act Performance Advertising Advisers Act CFTC Matters 8

9 Marketing into Europe Marketing objectives drive structure Enhanced European-wide regulation 9

10 Marketing into Europe: Non-European Funds Jurisdiction-by-jurisdiction Permissive, e.g.: United Kingdom Switzerland Prohibitive, e.g.: France Italy 10

11 Marketing into Europe: Non-European Funds Registration requirements Disclosure/reporting Prospectus and continuing disclosures to investors Annual report and accounts (remuneration) Reporting obligations to regulators Swiss Representative/Paying Agent 11

disclosures to investors Annual report and accounts

12 Marketing into Europe: European Funds Retail Funds (UCITS) Higher regulatory burden Global brand Alternative Funds (AIFs) Greater flexibility Professional investors (+) 12

13 Marketing into Europe: European Funds Ireland/Luxembourg Investor perception Time to market Flexibility Availability of platforms 13

14 Reverse Solicitation Not a reliable basis for fund raising Jurisdiction-by-jurisdiction Rigorous audit trail Potential investor acting at their own initiative Pre-existing relationship Fund-specific information only communicated following request from the investor 14

investor acting at their own initiative Pre-existing relationship

15 Any Questions? 15

16 Today s Speakers Abigail Bell Partner London [email protected] David Vaughan Partner Washington, D.C. [email protected] Mikhaelle Schiappacasse Senior Associate London [email protected] Gemma Burke Associate London [email protected] Darina Delappe Associate New York City [email protected]

com +1 202 261 3355 Mikhaelle Schiappacasse Senior Associate London Mikhaelle.Schiappacasse@dechert.

17 For further information, visit our website at dechert.com. Dechert practices as a limited liability partnership or limited liability company other than in Dublin and Hong Kong.

18 Interactive Brokers provides: Complete Turnkey Solution for Hedge Funds Trading, clearing, custody, and reporting capability on over 100 market destinations worldwide Member SIPC Member SIPC 18

and reporting capability on over 100 market

19 Automated Cost-Effective Solution for Hedge Funds of Any Size Our securities financing solutions provide depth of availability, transparent rates, global reach and automated lending and borrowing tools to professional traders. Trade on over 100 market centers in 24 countries. Direct market access to stocks, options, futures, forex, bonds, ETFs and CFDs from a single IB Universal Account TM. Choose a single fund account structure to manage one fund, or a multiple fund account structure to manage multiple funds. Our prime brokerage services are built on 38 years of providing innovative technology solutions to our clients. Our advanced technology and automation allows us to provide transparent, low commissions and financing rates, and best executions to help you maximize your results. Trading technology designed by and for professionals gives you access to a host of sophisticated trading tools, advanced algorithms and order types, extensive risk management controls and comprehensive reporting. Market your Funds to eligible IB customers using our online Hedge Fund Capital Introduction Program. Our User Access Rights system allows you to assign different managerial roles and client accounts to individual employees within your organization. Trades can be given up pre-trade or post-trade to multiple prime locations or taken up from executing brokers. Choose risk-based Portfolio Margin or Reg T Margin accounts. Our customizable statements and reports cover realtime trade confirmations, margin details, transaction cost analysis, sophisticated portfolio analysis, tax optimization and a variety of other supplemental reports. Visit Traders' University for easy access to all of our education offerings, including an impressive selection of live and recorded webinars. 19

Choose a single fund account structure to manage one fund, or a multiple fund account structure to manage multiple funds.

20 For More Information Contact an IB Representative 20

DEFINITIVE ADVICE PRACTICAL GUIDANCE POWERFUL ADVOCACY LLP

European Funds Practice DEFINITIVE ADVICE PRACTICAL GUIDANCE POWERFUL ADVOCACY LLP European Funds Practice Dechert s international Financial Services Practice features an industry-leading group of experienced