Offering Legal, Tax & Business Services to Investment Managers & Hedge Funds Worldwide Hedge Fund Business Plan & Checklist
Step 1 Getting Started Experienced service providers play a vital role in guiding hedge fund managers. Hire a lawyer with knowledge of the hedge fund industry from a regulatory, legal, tax and business perspective. Your lawyer should be committed to working directly with you through all aspects of the fund development and launch process. You can reach us easily by telephone, email, and Skype. We have good references and a good reputation for client service. Click Here to Learn More About Us A good hedge fund lawyer such as Hannah Terhune can help you start your hedge fund. Contact Us First
Step 2 Determine Your Hedge Fund Launch Date Assuming registration as an investment adviser and/or as a commodity pool operator is not required, you should be able to launch a U.S. hedge fund in 4 weeks. It takes a little longer to launch an offshore hedge fund. If registration with the regulators is required for the fund manager (i.e., as an investment adviser or as a commodity or forex pool operator) give yourself a few months to launch the hedge fund.
Step 6 Define the Terms of the Hedge Fund You are creating a unique financial product. Complete the Hedge Fund Terms Sheet Questionnaire that we provide to you when you become our client. We will work with you to identify, define, and provide examples of the core elements of hedge fund offering documents based on our substantial experience and extensive collection of hedge fund offering documents. Core elements include the hedge fund's investment objective, investment strategies, management team biographical data, hedge fund performance fees, hedge fund management fees, hedge fund redemption, hedge fund lock-ups, hedge fund risk disclosures, etc. Learn More About Hedge Fund Offering Documents
Step 7 SEC Form D and other Blue Sky FilingsIf your hedge fund accepts a U.S. investor, SEC Form D must be filed. We prepare and file SEC Form D for your hedge fund and the blue sky filings for any state where you find an investor. File your blue sky filings within the appropriate time -- either before distribution or within 15 days of the first sale in that state, depending on the state's rules. Learn More About Blue Sky Filings and SEC Form D
Step 3 Evaluate (RIA) Investment Adviser Licensing Requirements Determine whether you must register as investment adviser (RIA) with the SEC or your home state. If you trade forex, futures or commodities, you must register with the U.S. National Futures Administration (NFA) unless an exemption applies to you. Learn More About Commodity Pools and Forex Trading Only if you are licensed, you can advertise your advisory services. Learn More About Our RIA Formation Services
Step 4 Form the Hedge Fund & Investment Manager To start a hedge fund you need to create the fund and investment management company. In the United States, the hedge fund is established as a limited partnership (LP). Learn More About Incubator Hedge Funds and Learn More About Starting a Hedge Fund Your hedge fund management company can be set up as a limited liability company (LLC) in your home state. Each state requires that companies incorporated there appoint a local party to represent the entity and be accountable (i.e., the resident agent). Our sister company, Capital Management Administrative Services, LLC provides Registered Office Services in Delaware. In your home state, you can be the resident agent for the LLC. See U.S. Company Formations
Step 5 (RIA) Investment Adviser Registration. If you need to register as an investment adviser, start the registration process early. This process should start concurrently with the development of the hedge fund as the investment adviser registration process can take a few months in some states. You should sign up for the Series 65 examination unless your state accepts an equivalent certification or credential. Obtain study materials and pass the Series 65 Exam. Learn About Investment Adviser Registration If you intend to invest the fund’s assets in any futures, options on futures, forex (foreign currency), swaps or other related derivatives products, you need register as a commodity pool operator (CPO) or a commodity trading advisor (CTA) with the U.S. Commodity Futures Trading Commission (CFTC) and become a member of the National Futures Association (NFA). Learn About NFA Registration
Step 8 Hedge Fund Marketing and Sales Deposit your seed capital and start the initial trading of the fund. Start distributing your hedge fund offering documents and attracting investors. Keep a log of all individuals to whom you distribute your hedge fund offering documents. We provide you with a form you can use for this purpose. You can use a web site that is SEC compliant to administer the hedge fund. You cannot use the web site to market the hedge fund and find investors in the United States unless you operate under Rule 506(c). You cannot advertise to the public in the United States unless you register your hedge fund with the SEC under rules governing hedge fund advertising. In that case, the SEC has to review and approve your ads for the hedge fund. Work only with licensed brokers. The SEC is cracking down on unlicensed broker activity. For example, read "SEC Continue Crackdown on Unregistered Broker-Dealers"
Step 9 Hedge Fund Administration There is no legal requirement in the United States to have an administrator. It is a good idea to have one if you do not have time to manage the books of the fund. Offshore, local country law may require an administrator for a recognized or regulated hedge fund. The administrator calculates the net asset value (NAV) of the fund portfolio, calculates performance and management fees, and creates account statements for investors. In some situations, the administrator will control the movement of cash through a “second signer” service, designed to provide investors against hedge fund fraud. A “second signer” or "cash movement" agreement requires the fund’s management to obtain a signature from the administrator prior to making a transfer to or withdrawal from the fund’s bank and/or brokerage account. Good fund administration lowers the cost of year end tax return preparation and the cost of an annual audit. We offer hedge fund administration services through Capital Management Administrative Services, LLC. Contact Us and Learn More About Hedge Fund Administration
Step 10 Initial & Annual Audits If you allow non accredited investors in your U.S. hedge fund, you will need an initial "launch" audit. The auditor works with the hedge fund manager and administrator to prepare the fund's financial statements. Audited financial statements contain a wealth of information not only about the financial position of the fund, but also regarding key decisions the fund has made and expenses. We maintain a list of low cost PCAOB (required by the Securities and Exchange Commission and some state security boards for RIA licensees) and non PCAOB auditors. The PCAOB is directed by the Sarbanes-Oxley Act of 2002 to establish auditing and related professional practice standards for registered public accounting firms to follow in the preparation and issuance of audit reports. Contact Us For Assistance
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Capital Management Services Group, Inc. is recognized by discriminating persons as being one of the foremost legal authorities in the hedge fund industry. Ms. Terhune's numerous articles on hedge funds and international tax matters have appeared in publications worldwide. Read Our Leading Media Content and Articles by Hannah Terhune on Hedge Funds and International Tax Planning, Chances are, if you have read anything related to starting a hedge fund, Ms. Terhune wrote it. Read Our Client Comments and Read About Hannah Terhune on LinkedIn. When you engage us you get a unique combination of securities, tax, and business experience. Give us the opportunity to use our knowledge and experience for you. No client is too large or too small for us. We pride ourselves in providing personal attention to each Client. We provide high quality services at competitive rates. But don't take our word for it, give us a call and let us prove what we can do for you.