Setting up a Hedge Fund - International Fund

[italkcash]

Offshore hedge funds are investment vehicles organized in offshore financial centers. The advantage of an offshore hedge fund is that the investors in the fund generally are not subject to taxation. Investment fund managers typically create offshore funds in Caribbean jurisdictions, although a European offshore entity may be more appropriate if a significant number of European investors are involved.

Correctly structuring an offshore hedge fund is of critical importance and is a major determining factor in its overall success. There are six major issues that must be addressed. These issues pertain to tax issues, regulatory matters, day-to-day business management, investment strategies, marketing, and back-office operations. Addressing these areas prior to creating an offshore hedge fund (or funds) eliminates problems later. It is important to understand that these are all closely related.

The typical offshore hedge fund manager seeks to create a financial investment for high net-worth and institutional investors. The key distinction with respect to offshore hedge funds is that they are not retail, publicly offered investment products, which would be subject to more stringent regulatory requirements.

Offshore Hedge Fund Locations

British Virgin Islands
www.bvi.gov.vg/

Cayman Islands
www.cayman.gov.ky

Cyprus
kypros.org/Government/

Dubai
www.uaecb.gov.ae

Gibraltar
www.fsc.gi/fsc/home.htm

Guernsey
www.gfsc.guernseyci.com

Hong Kong
www.hkma.gov.hk

Ireland
www.basis.ie

Isle of Man
www.gov.im

Jersey
www.jerseyfsc.org

Liechtenstein
www.bankenverband.li

Luxembourg
www.bcl.lu

Singapore
www.mas.gov.sg

Switzerland
www.snb.ch

The Bahamas
www.bfsb-bahamas.com

[buaya]

Hedge funds are really out of ordinary banker league. You need to have a good investment tracker record and close connection with the riches in order to even start a hedge fund

[orangebelt]

Is that true buaya???

Wat if the case when an investment with diversified portfolio includes hedge fund as one of the sector??

Is that allowed??

Since hedge funds are not subject to taxation, how does the local government benefit from it??

[kereta06]

A hedge fund is a private investment fund that charges a performance fee and is typically open to only a limited range of qualified invest

[vialdana]

How much money do you need to get involved in a hedge fund? Are we talking lots or can anyone invest in them?

[id62000]

Start your own hedge fund
By Marcia Vickers

The bare necessities
First, I needed a lawyer to create investor contracts and such, at a charge of $400 an hour, or about $30,000 a year. Other gotta-haves are an auditor ($30,000 a year) and an accountant (ditto).

A back-office outsourcer to handle stuff like shareholder communications runs as much as $75,000 a year - though a conference exhibitor that uses workers in India was peddling itself for about half that.

I also needed to trade through a brokerage. One exhibitor uses Bear Stearns and Goldman Sachs as clearing agents. ("If you use us, you can use Bear and Goldman's names on your marketing material. It really makes you look legit," the salesman told me.)

Then there was the optional compliance consultant ($15,000-ish), who ostensibly would keep the regs away. We're talking $200,000 just to get going!

Ah, but that's why there are funds of funds - hedge funds that invest solely in other funds - aching to provide seed money to folks just like me! They'd supply me with $20 million as long as I handed over half my annual fees and profits. Bill, a former Merrill Lynch broker who'd spent the past two years "sailing around the world, just diggin' life," said the terms seemed onerous: "They'll own you, man!"

Of course, I could also raise money from rich investors. All I needed was a fabulous track record, which, it turns out, could be arranged. A woman who had worked for a company that sets up hedge funds in the Caymans - Ms. Caymans, I'll call her - gave me this simple yet invaluable tip: Hire an auditor to reset your NAV (net asset value) after you've had a good quarter. Ms. Caymans said, "If you're trading your own money to start, no one will know." Pity that option isn't available for heart-transplant specialists.

Next I was off power-schmoozing with the not yet rich and famous. I first noticed Claudette, six feet tall in stiletto heels and sporting fire-truck-red lipstick and a five-alarm personality. Word spread she had "$50 million to invest from clients in the Middle East."

Then there was Henry. He ran an astrology mutual fund. If, say, the moon was eclipsing Uranus, I'm guessing that might mean switching from stocks to pork bellies. He was going to use the same strategy for his hedge fund, which would- - duh! - be easier to market than a boring mutual fund.

Hanging out by the doughnuts were two guys, both in their late 20s, who had cut their teeth at the same bucket shop on Long Island years ago along with "93 guys doing ropes of cocaine" under the tutelage of a Mob guy with "a missing pointer finger." They fondly recalled phone sales scripts they used in pump-and-dump schemes, e.g., "Your mind is like a parachute - it only works when it's open!" They were both starting "black box" funds.

Then I chatted with Mark, a gung-ho kid in his early 20s who was starting a "complex derivatives fund" with "a friend from MIT." He says that after reading George Soros's book The Alchemy of Finance, "I was hooked on trading!" He then admits he hasn't traded anything. Ever.

Finally, the main event: speed networking - with about 50 investors who "would likely be there," according to conference organizers. The strict rule: Investors, armed with our info, were to approach us if interested. Not the other way around.

We took our places under big numbers tacked to the wall. I was 22. Next to me was Steve, a former analyst who was launching a bank-stock fund and who was visibly sweating.

During the first hour, three investors trickled in. Steve and I stood at attention with frozen smiles. None came our way. During the next hour about six more showed up. The mysterious Claudette saw some good action, but most of us - nothing.

Awkward? Only the weak feel awkward. "Do what you love, and the money will follow," the life coaches say. But I, hedgie, know better. Follow the money, and you'll love what you do. For sure.

[zapper]

I would prefer to start a hedge fund in the BVI(British Virgin Islands), since it`s very secure there and also you don`t have any problems with taxes... that`s the reason why it`s called "Tax Free Haven".