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If one were to sum up the key role of a hedge fund administrator, it is to independently value a fund's assets, allocate those assets correctly to individual investors, and accurately report the allocations to those investors.  Investors want an administrator, not the manager, to independently calculate the fund's assets and monitor the books and records, and to report the fund's NAV. For any new start-up manager, it is worth remembering that when selecting the most appropriate administrator they understand that whilst the administrator will ordinarily perform a range of middle- and back-office functions, at a high level they:  •
Choosing appropriate service providers is one of the cornerstones to creating a successful hedge fund business.  All too often, start-up managers try to appoint the big, bulge-bracket names but this is folly. Unless the manager in question has existing relationships with the likes of Goldman Sachs, and is launching with USD250 million or more in AUM, they will have precious little chance of becoming clients of the industry's leading asset servicers. So the first thing to consider at the pre-launch phase is: who would be the best service providers to support you relative to the size of your fund? "If
Operational due diligence or “ODD” are arguably three of the most important words for any start-up manager hopeful of attracting new investors. Such is the level of expectation among institutional investors today that even if the manager only has USD20-30m in AUM and outsources the CFO function, operationally they still must look and act like a serious outfit.  As Frank Napolitani (pictured), Director, Financial Services at EisnerAmper LLP, comments: “You have to be buttoned up from a front-middle-back-office, legal, compliance and infrastructure standpoint and have answers to things; for example, on the outsourced CFO point, they might want to say, `I
Although it might not necessarily be top-of-mind for a start-up manager, if they are serious about building a proper business then establishing a culture of compliance from the get-go is important.  A new hedge fund manager that is not required to register with the SEC "doesn't necessarily need to have as detailed a compliance manual as an SEC-registered investment adviser," says Brian Roberts (pictured), Senior Compliance Analyst and Hedge Fund Practice Associate for ACA Compliance Group, a leading regulatory compliance and consulting firm.  However, unregistered fund managers still owe their clients a fiduciary duty and are subject to a number
US hedge fund managers face significant regulatory requirements, which this chapter cannot possibly cover in detail. But there are a few key areas of particular import, which shall be summarised below. In addition, this chapter will highlight some of the key considerations for implementing a compliance manual; a must-do task for any ambitious start-up manager who intends to incorporate best practices from the get-go and place themselves in the best possible light with prospective investors. Dodd-Frank Act Already six years in, US hedge fund managers are subject to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. If
Planning a hedge fund launch is a serious business. People need to decide whether they are truly ready, both financially and mentally, and be confident in their investment strategy. This may sound trite but all too often start-ups rush to get a hedge fund in place without clearly thinking everything through.  "It is a significant undertaking and should not be treated lightly. From a financial perspective the first thing to do is to create a budget broken down into three categories: budgeting for fund expenses, budgeting for manager expenses and finally budgeting for personal expenses," says Jeffrey I Rosenthal (pictured),
When embarking on any new business, it's important that one not only engages professionals with deep industry knowledge but also commercial knowledge to support the various stages of business growth. For anyone establishing a hedge fund, their needs are going to change as their business evolves from launch to maturity. "If a manager launches with USD10 million, their tax situation maybe far different compared to some point in the future if the fund's assets have risen to USD200m. If a manager derives profit from their management fee, proper structuring of the management entity may reduce self-employment tax," explains Ron Geffner
The two key questions that will drive fund structuring decisions are: Where is the money coming from and what do you want to do with it? This will determine whether the start-up manager launches a domestic Delaware LP structure, which might be the case if his investors will only be US taxable investors, or whether he chooses a more traditional offshore master feeder structure to accommodate US tax-exempt investors and non-US investors as well as US taxpayers.  "An offshore fund is typically organised as a corporation and functions as a blocker of taxable income to the foreign investor. Domestic investors,
The hitherto opaque alternative investment funds (AIFs) industry has been making significant strides towards transparency, driven largely by the demands of institutional investors and global regulators, who want to see AIFs deliver clarity and accuracy in their trading and investor reporting methods. This is good news for an industry that is growing in size and scale globally and going retail with liquid alternatives. But how are AIFS set up in the first place? How do traders and prop desk alumni take the first the steps to setting up their own AIFs in the transparent and correct format required by investors
Calastone, the global fund transaction network, has expanded into New Zealand, bringing critical infrastructure to support smoother transaction flow across Australasia. Calastone Managing Director Australia, Sarah Hayward, says the firm’s extended cross border coverage enables transactions between Australian and New Zealand platforms, fund managers and respective counterparts.   “Our expansion has been primarily driven by our Australian clients wanting access to cross-border opportunities and New Zealand clients embracing automation,” she says. Calastone’s technology provides total interoperability, relieving asset managers, platforms, custodians, and administrators from the burden of unifying or standardising legacy technologies for straight through processing of information. The

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