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Why Start an Offshore Hedge Fund? We set up hedge fund and fund of funds in the United States, the British Virgin Islands (BVI), the Bahamas, the Cayman Islands (CI) and St Lucia.  We cater to international clients. The term "offshore" is any country but your home country.  Hedge funds are set up offshore to benefit from country neutrality and regulatory sophistication. For example, some countries have very high tax rates and dated laws that are not geared toward progressive methods of making money (i.s., the current hedge fund industry).  In many countries, there are no options for an individual to become licensed as an investment manager or for the individual to set up a hedge fund. In those countries, the laws favor only the established, larger "players" in the industry. Those countries are slow to modernize their laws. In those countries "the world is flat".   Contact Us for Assistance and Learn More by Reading our Leading Media Articles

U.S. Investors & PFICs It is perfectly legal for U.S. investors to invest in an offshore fund (i.e., a fund outside the United States). The tax issues are manageable. The U.S investor has two options upon investing in an offshore fund which may be taxes as a Passive Foreign Investment Company (PFIC). One option is that the U.S. investor elect to recognize income on an annual basis just as if the offshore fund set up as a corporation is in fact a partnership for U.S. tax purposes.  The second option is to elect to defer the recognition of the income until the time of a dividend distribution (if any) from the fund. Each U.S. investor in an offshore can choose to elect either option and this election is made on their personal tax return in the initial year of the investment. This election can be changed only with respect to additional new capital contributions to the offshore fund.  We offer tax advise and hedge fund administration services. Learn More About Hedge Fund Administration and Contact Us for Assistance

Offshore Funds & PFIC Statements (K-1 Equivalents) Option 1 is available to the U.S. investor only if the offshore fund is willing to provide a PFIC Statement with the offshore fund's gain and loss information with respect to the US investor (i.e., a Form K-1 equivalent).  If the offshore fund does not provide this data, the U.S. investor must rely on Option 2. It is more tax advantageous for U.S. investors if the U.S. investor is sent a PFIC Statement (i.e., a Form K-1 equivalent). If no PFIC Statement is provided, the U.S. investor is left with Option 2.  In that case, the U.S. investor pays an interest charge at the time of dividend distribution from the offshore fund for any distribution above their investment basis.  This is why an offshore fund should issue a PFIC statement (also called a "K-1 Equivalent" for U.S. investors.  The PFIC statement resembles a Form 1099 or a Form K-1 and provides the US investor with their pro rata share of fund income by category (i.e., interest, dividends, Long term capital gains, short term capital gains, etc.).  The U.S. investor can then recognize its annual income on its tax return. We prepare offshore fund PFIC Statements for offshore funds and offer full fund administration services. Learn More About Hedge Fund Administration and Contact Us for Assistance

Best Hedge Fund Countries The best place to setup an offshore hedge fund is the United States, the British Virgin Islands, the Bahamas, St Lucia, or the Cayman Islands.  These countries offer a favorable legal environment that allows hedge funds to start out as unregulated funds with the option (but no legal requirement) to progress to a licensed hedge fund.  An unregulated hedge fund costs less to set up than a licensed hedge fund.  In the British Virgin Islands (BVI) you can set up a Closed-Ended Company that functions as a type of hedge fund, an Incubator Fund, an Approved Fund, a Private Fund or a Professional Fund.  Learn More About BVI Hedge Funds  The Bahamas is a good choice but a little more expensive than the BVI.  In the Bahamas, you can set up a SMART Fund and there are many types of SMART Funds to choose from.  The Cayman Islands also offers some regulatory flexibility but remains a bit pricey when compared to the United States or the BVI.  St Lucia is a newer fund jurisdiction but of interest. If you are not based in the United States, the United States is "offshore" to you and offers tax and regulatory neutrality.  Learn More About US Hedge Funds  Foreign investors in a U.S. fund are not taxed on trading profits. Hedge fund managers should consider setting up an offshore hedge fund if they expect to have investors from other countries or if their home country's laws are not geared toward the hedge fund industry.

UBTI Blocker Funds Hedge fund managers expecting U.S. tax-exempt investors to invest in the fund (i.e., such as an IRA, ERISA-type retirement plan, foundation, endowment, etc.) should set up an offshore hedge fund set up as a corporation (i.e., a blocker entity) when leverage is required to execute the hedge fund's trading program.  This approach allows the U.S. tax-exempt investor to avoid unrelated business taxable income (UBTI) tax exposure. 

What is UBTI? Under U.S. income tax laws, a tax-exempt investor (such as an ERISA plan, a foundation, or an endowment) engaging in an investment strategy that involves borrowing money is liable for U.S. income tax notwithstanding its tax-exempt status. The UBTI tax can be avoided by having the tax-exempt organization invest in non-U.S. corporate structures (i.e., offshore hedge funds set up as corporations).  Learn More About U.S. and Offshore Tax Issues  A fund sponsor should be aware of the need for a UBTI blocker fund when creating an offshore fund aimed to attract to U.S. investors.  While we are based in the United States we have a truly global focus and cater to international clients.  Contact Hedge Fund & International Tax Attorney Hannah Terhune for Assistance

Master Feeder Fund Structure A “master-feeder” group of funds involves one or more “feeder” funds that invest in a “master” fund. The master fund and each feeder fund is organized as a separate legal entity. Each feeder fund generally invests all of its assets in the master fund.  Interests in the master fund are sold privately to one or more feeder funds.  The interests in the feeder funds are sold privately to investors.  The portfolio management, fund accounting and custody functions are performed at the master fund level while the distribution, shareholder servicing and administration functions of a traditional unregistered fund are performed at the feeder fund level.

U.S. SEC Offshore Alert The U.S. SEC's 134-page report published in 2003--The Implications of the Growth of Hedge Funds--presents the status of the hedge fund industry as viewed in the United States.  What is interesting about this SEC Report is that articles and web content authored by our very own hedge fund attorney Hannah Terhune, JD, LLM (Taxation) (when she was the Chief and only Attorney at GreenCompany.com) on offshore hedge funds was cited on page 10 of the U.S. SEC Report as providing information the SEC Staff found to be valuable in its understanding of the hedge fund industry.  For a decade, hedge fund attorney Hannah Terhune has been counted on by the U.S. government and hedge fund organizers worldwide as a source of cutting edge and practical information on hedge fund formations.

You will see from this web site that we supply more information about hedge funds than most books do on the subject.  It's great to see that Hannah Terhune's expertise is appreciated by the SEC! This is quite a coup for Hannah, and provides one more piece of evidence as to how she can help you.  You can reach her today at hterhune@capitalmanagementservicesgroup.com or at +1 (307) 413-2212 or on Skype at:  CapitalManagementServicesGroup.

"Offshore" USA Investment Adviser Registration Does your home country not offer licensed investment adviser status to anyone outside the establishment? Don't be discouraged! Click Here to read our landmark article about the advantages of registering as an investment adviser with the U.S. Securities and Exchange Commission (SEC) or with one of the fifty (50) states. U.S. law is clear, fair and easy to comply with.  Learn More About Investment Advisers  and Contact Hedge Fund Attorney Hannah Terhune for a Free Consultation

The United States is a Safe-Haven for Business  Most U.S. states do not require disclosure of ownership information when companies are formed. Read the GAO 2006 Report of U.S. Company Formations  The majority of U.S. hedge funds are incorporated in Delaware because Delaware law protects business company owners, allows for economic privacy, and does not require company filings.  The Delaware “brand” of company law has been adopted by many other countries.  In addition to Delaware, Florida and Wyoming are good states in which to incorporate.   Learn More About U.S. Company Formations  and  Contact Us for Assistance  Hedge fund sponsors based outside the United States are surprised to learn about the “light touch” of U.S. regulation and low costs associated with forming a U.S. hedge fund.  Even if you are based outside the United States, you can set up both the hedge fund and its management company in the United States.   A U.S. incubator hedge fund can be converted to a full-fledge hedge fund in the United States very quickly.  Learn More About Starting a Hedge Fund 

U.S. Virtual Office Services & U.S. Bank Accounts U.S. investors can invest in an offshore hedge fund.  Foreign investors can invest in a U.S. hedge fund.  A foreign investment manager can set up and run a U.S. hedge fund without ever coming to the United States.  A U.S. presence is not required.  We offer U.S. Virtual Office Services if you feel that you need a working office address in the United States.  We also offer U.S. Banking Services if you need a U.S. bank account for your hedge fund or your hedge fund management company.  Contact Us 

CALL US FIRST We are experts. Click on any reference below to our leading articles:

Strategic Hedge Fund Planning by Hannah Terhune.  Wilmott Magazine Ltd. (Volume 2013, Issue 63, pages 8-11 January 2013).

Hedge Funds - Limited Partners' Right of Access After Parkcentral Global, L.P., v. Brown Investment Management, L.P. by Jim Brennan.   Cititrust Edge Magazine (4th Quarter 2012).

Strategic Hedge Fund Planning by Hannah Terhune. Canadian Hedge Watch (March 2012).

America the Beautiful Tax Haven. Cititrust Edge Magazine (1st Quarter 2011).

Offshore Hedge Fund Focus:  Master & Feeder.  Cititrust Edge Magazine (4th Quarter 2010).

U.S.--Cross Border Credit Agreements:  Planning for U.S. Withholding Taxes.  Practical International Tax Strategies (November 15, 2010).

Starting an Offshore Fund.  themanager.org (June 2008).

Mixing Investment Adviser and Brokerage Services.  Hedge Fund Monthly by EurekaHedge.com (October 2007).

Offshore Fund Taxation.  Hedge Fund Monthly by EurekaHedge.com (May 2007).

Forex Trader to Forex Manager.  Offshore Business Magazine (November 2006).

Forex Trader to Forex Fund Manager:  The Path to Success.  Hedge Fund Monthly by EurekaHedge.com (October 2006).

Drafting Hedge Fund Performance Allocations.  Hedge Fund Monthly by EurekaHedge.com (August 2006).

Como Crear su Propio Hedge Fund by Hannah M. Terhune, Eva Porras, Argilio Rodriguez and Garrett Fisher (2006).

Offshore Hedge Funds: Focus on Master/Feeders by Hannah M. Terhune (2006).

Temas Sobre Impuestos de Sociedades Colectivas para Hedge Funds en Paraiso Fiscal by Hannah M. Terhune (2006).

Establish a Marketable Track Record with an Incubator Fund by Hannah M. Terhune (2006).

Must I Register as a Commodity Pool Operator? by Hannah M. Terhune (2006).

Do’s and Don’ts for Crafting Hedge Fund Performance Allocations by Roger D. Lorence and Hannah M. Terhune. Derivatives:
Financial Products Report (an RIA publication) (September 2005).

Trading Foreign Index Contracts? Know the Tax Rules Before You Trade by Hannah M. Terhune and Roger D. Lorence. Stocks, Futures and Options (June 2005).

Practical Strategies For Section 475(f) Elections by Roger D. Lorence and Hannah M. Terhune. Derivatives Financial Products Report (WG&L/RIA, a Thompson Company) (March 2005).

Forex Hedge Fund Management by Hannah Terhune and Roger D. Lorence.  Currency Trader (March 2005).

Advising Clients on Internet Server Co-Location Agreements, Practical International Tax Strategies (March 15, 2004).

Structuring and Financing International Operations Using Hybrid Entities and Tax-Efficient Financing Practical U.S./International Tax Strategies (Jan. 15, 2004).

Hedge Fund Compensation Arrangements. Practical U.S./Domestic Tax Strategies at Page 18 (Dec. 2003).

U.S. Inbound Investment – The Portfolio Interest Exemption. Practical U.S./International Tax Strategies (Dec. 15, 2003).

Foreign Futures Planning: The 60/40 Question. Practical U.S./International Tax Strategies at Page 12 (Sept. 30, 2003).

Managing Offshore Hedge Funds - A View from the Beach: Practical U.S./International Tax Strategies at Page 9 (June 15, 2003).

Offshore Hedge Funds - Master/Feeder Compliance Issues: Practical U.S./International Tax Strategies at Page 9 (May 15, 2003).

Questions? Call us (307) 739-6492 or write to us.

ARE YOU AFRAID OF WHAT YOU DO NOT KNOW? Get answers to your specific questions by speaking directly to Hannah Terhune, an experienced hedge fund and international tax attorney. Ms. Terhune's hard-earned knowledge and experience can be put to work to save you unnecessary steps and costly wasted effort. The consultation is an invaluable opportunity to speak to Hannah one-on-one and learn how to achieve more in less time. As a result, you can anticipate that the return on your investment will far outweigh the costs associated with our unsurpassed services. Ms. Terhune's credentials reflect an invaluable resource that combines a well-informed professional practitioner with sound ethical judgment that cannot be overestimated. The expertise required to recommend best solutions and provide sound advice should never be taken lightly. when you are finished with your consultation, you will be impressed and informed about your business plans.  Contact Hannah Terhune now!

WHY HIRE US When you hire us for hedge fund you get a unique combination of securities, tax, and international experience, focused on the trader niche. We are one destination for special hedge fund and trader tax needs. We think we have the best set of offering documents based on the current and ever changing federal, state, and offshore securities, commodities, and tax laws. We aim and deliver quick turnaround times. We understand that clients want to begin business as soon as possible. We conceive, structure, and deploy the best strategies. Our customers value our one-stop shop relationship. We help you start your business and continue to assist you. Our tax services affiliate handles accounting, software, and tax compliance, including all tax matters (tax planning and tax returns). Only one thing counts with us and that is our customer relationships!