June 25, 2015 Key Considerations in Structuring a Hedge Fund An overview of common fund structures and marketing 2015 Dechert LLP
Corporate Investors Corporate Assets June 25, 2015 2
Partnership Investors Partnership Assets 3
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
Master-Feeder Structure Non-U.S. investors/ U.S. tax exempt U.S. taxpaying investors Corporate Feeder Partnership Feeder Partnership/ Corporate Master Assets 5
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
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
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
Marketing into Europe Marketing objectives drive structure Enhanced European-wide regulation 9
Marketing into Europe: Non-European Funds Jurisdiction-by-jurisdiction Permissive, e.g.: United Kingdom Switzerland Prohibitive, e.g.: France Italy 10
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
Marketing into Europe: European Funds Retail Funds (UCITS) Higher regulatory burden Global brand Alternative Funds (AIFs) Greater flexibility Professional investors (+) 12
Marketing into Europe: European Funds Ireland/Luxembourg Investor perception Time to market Flexibility Availability of platforms 13
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
Any Questions? 15
Today s Speakers Abigail Bell Partner London Abigail.Bell@dechert.com +44 20 7184 7443 David Vaughan Partner Washington, D.C. David.Vaughan@dechert.com +1 202 261 3355 Mikhaelle Schiappacasse Senior Associate London Mikhaelle.Schiappacasse@dechert.com +44 20 7184 7845 Gemma Burke Associate London Gemma.Burke@dechert.com +44 20 7184 7818 Darina Delappe Associate New York City Darina.Delappe@dechert.com +1 212 641 5679 16
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.
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