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Incubator Hedge Funds
We would like to thank Hannah and the company for their invaluable help in forming our incubator hedge fund. They were extremely knowledgeable, efficient, and professional while working with us, and we are glad to have them as a vital resource as we grow our incubator hedge fund into a full-fledged one. Dale Angus, Golden Egg Capital Management LLC. March 28, 2012.
Incubator Hedge Funds If you delay drafting your hedge fund’s offering documents and are willing to defer collection of management and performance fees, you can start and operate an incubator hedge fund. Free Hedge Fund Business Planning Checklist
In the United States, the incubator hedge fund is established with two companies—the hedge fund and its investment manager. In many other countries, a hedge fund incubator can be established with one company; the investment manager can be established at a later date. Contact Us for a Free Consult One of the biggest advantages of the incubator hedge fund approach is that it allows you to start and fine-tune your investment strategy while generating a record of trading performance that can be used to transition to a full-fledged hedge fund when you are ready.
Generally, the key difference between a full-fledge hedge fund and an incubator hedge fund is the ability to charge performance and management fees and the availability of offering documents. Learn More About Hedge Fund Offering DocumentsYou can deposit your own money as “seed capital” into the hedge fund and you can accept money from friends and family into the hedge fund. While you can accept money from friends and family in your incubator hedge fund, you cannot charge them performance and management fees in most cases. In some states and countries, it is possible to charge performance and management fees in an incubator hedge fund. We can form a U.S. incubator hedge fund for $2,000 and set it up in one to two weeks.
Our Customers Hannah and her team are experts in their field of offshore funds. The expertise and care to think ahead of all the specific issues I might have as a client are greatly appreciated. Capital Management Services Group applies a no-nonsense and straight forward business approach to a complex maze of international rules and regulations. I'm pleased to have them on my team and certainly recommend them to any professional looking for guidance in the hedge fund industry.Andre Voskuil, DutchOracle Capital Ltd. December 28, 2011
In many countries, a hedge fund incubator is established with one company. However, a simple International Business Company cannot be used as an incubator hedge fund. To start a U.S. incubator hedge fund, you generally need to form two business entities: the hedge fund, and its investment manager. The hedge fund company is typically set up as either a Delaware Limited Partnership (LP) or Limited Liability Company (LLC). We can set up both companies for you quickly. Contact Us for Assistance
Why the United States?
Even if you are based in another country, consider forming a U.S. hedge fund. The United States offers easy low cost access to the legal, tax, accounting, retail and institutional brokerage, and the regulatory services needed by a hedge fund sponsor to organize a hedge fund. Despite what some hedge fund sponsors think about the purported negativity surrounding the United States, many more establish U.S. based hedge funds because of the minimal expenses associated with starting a U.S. hedge fund and the sheer convenience of having their U.S. based family members and/or other U.S. investors able to invest in the hedge fund.
Hedge fund sponsors (i.e., the organizer(s) of the hedge fund) based outside the United States are usually surprised to learn about the “light touch” of U.S. regulation and low costs associated with forming a U.S. hedge fund. Hedge fund sponsors (i.e., the organizers of the hedge fund) based offshore can set up both a hedge fund and its management company in the United States, if desired.
The United States Allows Hedge Fund Advertising
The JOBS Act, signed on April 5, 2012, lifted the ban on hedge fund advertising for hedge fund's operated by fund managers registered with either the SEC or a state regulator. The decades-old restriction on how hedge funds can raise money is gone! Hedge fund managers can speak publicly about their hedge fund's strategies and performance and advertise normal channels. The Securities & Exchange Commission (SEC) will issue hedge fund marketing rules in the next few months. Click Here to Learn More About Hedge Fund Advertising
Why a Delaware Hedge Fund?
In the United States, hedge funds are found chiefly in Delaware. U.S. hedge funds are established primarily in Delaware because Delaware offers the most advanced business friendly law in the United States. In fact, Delaware’s business friendly environment is attractive to companies across the globe, not just hedge funds. Governing law matters. Delaware corporate law affords directors and officers a great deal of discretion in managing the business free from the undue interference of shareholders and regulators. Delaware's highly regarded reputation stems from the Court of Chancery that focuses solely on company law. The Court of Chancery has earned a reputation for fairness and decisiveness when hearing disputes between investors and hedge fund managers. Indeed, the Delaware “brand” of company law has been "exported" to several other countries. Moreover, Delaware is one of the most protective jurisdictions in the world of proprietary information. The issue of privacy extends beyond Delaware's borders to other U.S. states. Click Here to Learn More About Delaware Company Law.
The United States is a Safe-Haven for Business A 2006 Government Accountability Office report, found that most other states do not require ownership information when businesses are formed or don't have to submit periodic reports. Read the GAO 2006 Report of U.S. Company Formations In addition to Delaware, Nevada and Wyoming are advantageous places to set up a company. Learn More About U.S. Company Formations Given the depth, privacy, predictability and pro-business cast of Delaware's company law, it makes good business sense to set up a hedge fund in Delaware. Contact Us for Assistance We offer company formation services and registered agent and registered office services in Delaware. Click Here to Learn More About Delaware Company Services
The hedge fund's general partner/management company can be formed in your home state or home country. However, there are many good reasons for setting up the general partner/investment manager somewhere else. If you are not certain about your plans to stay in your home state or country, we suggest setting up the general partner/management company in Delaware. For tax reasons, hedge fund sponsors based in New York or Texas may consider setting up three companies: the hedge fund, the investment manager for the carried interest share, and a management company.
U.S. Regulatory Matters
Even though not necessary for an incubator hedge fund, we will discuss with you NFA, SEC and state-level investment adviser registrations and licensing, as well as other matters you will address when you convert the incubator fund to a full-fledge hedge fund. The foregoing issues are relevant if your fund accepts U.S. investors or if you base hedge fund management in the United States. Learn More About Investment Adviser Registration if you trade securities. Learn More About NFA Registration if you trade spot forex, commodities or managed futures.
How to Transition an Incubator Hedge Fund to a Full-Fledge Hedge Fund
With the existing hedge fund and investment manager already in place and a marketable track record to show potential investors, converting your incubator hedge fund to a full-fledge hedge fund is a straightforward process. Once you are ready to launch the fund, you will need to prepare offering documents for the hedge fund. We prepare offering documents for hedge funds. Contact Us for Assistance
Hedge Fund Offering Documents
Offering documents are the key to hedge fund sales. While there is no requirement that prospective investors in a U.S. hedge fund be provided with offering documents, it is good (and common industry practice) to do so. Most hedge funds provide written information to their investors in the form of a private offering memorandum (Memorandum). Offering documents-- referring to both the prospectus and subscription agreement--go by several names and/or acronyms including: Private Placement Memorandum, PPM, Offering Memorandum, OM, or Prospectus. Whatever it is called, offering documents are extensive documents individually created for each hedge fund. In the United States, offering documents include a private placement memorandum (PPM, OM or prospectus), a limited partner (or limited liability company) agreement, and a subscription agreement. If the hedge fund’s manager is registered with a U.S. federal or state regulator, the offering document “package” will included a Form ADV Part 2, which describes the investment manager in detail. Offering documents for an offshore hedge fund include the private placement memorandum and the subscription agreement. Learn More About Hedge Fund Offering Documents
Read the rest of this page as it will help you connect the dots and prepare you for a free consult with us to answer any remaining questions you have may have. Click Here to Request a Free Consult We will discuss whether the incubator hedge fund it is right for you. During the incubator fund development process you access to a veteran hedge fund and tax attorney, Hannah Terhune. She and her staff carefully guide you through the process of setting up the incubator hedge fund. The incubator hedge fund development process is relatively simple. Hannah Terhune developed this strategy in 2005 as a result of working closely with traders. She realized that an answer was needed to deal with the biggest legal frustration for 'at home' traders: not being able to use personal prior trading results as proof of their ability to successfully trade the markets.
Our Customers Hannah and her team were knowledgeable, professional, and a pleasure to work with; having access to their expert help is indispensable in forming an incubator fund or hedge fund entity at a very reasonable cost and time frame. D. Rxxxn December 21, 2011
Creating a hedge fund to protect and manage your assets or the assets of others for a fee is a practical way to earn a living. Successful hedge funds continue to attract the wealthy, the working not-so-wealthy, businesses, and pension funds looking for better investment options. Despite recent law changes, the United States still offers a favorable environment for smaller hedge fund startups.
One reason why active traders do not realize their dream of starting a fund is that they do not have a proven track record. Unless you are known as a successful trader and have a professional pedigree, you may not be able to attract investors into your fund until you can show them a performance record. For successful active traders like you, this is annoying. If you are planning to start a hedge fund you probably experienced success trading your own accounts or trading professionally. Securities laws make it difficult and expensive to use your prior performance records to promote a new venture. Our incubator hedge fund strategy is a proven solution to your lack of credentials in the industry. By setting up an incubator hedge fund and following our protocols you can create a performance record that can be marketed and shared with prospective investors and clients. Only when you are sure that investors will come aboard your fund, upgrade your incubator fund to a full-fledge hedge fund. Call us for a free Consult!
What types of incubator hedge funds are available? There are many different types of incubator hedge funds. An incubator hedge fund can be started for any specific trading strategy. It should mirror the investment program to be used in the future to trade customer money.
Equity FundsIf the hedge fund trades securities, ETFs, etc., and has U.S. investors and charges performance and management fees, the hedge fund manager will have to register either with the SEC or its "home" state unless an exemption from investment adviser registration is available to it. Learn More About Investment Adviser Registration We offer SEC and state-level investment adviser registration services.
Spot Forex, Commodities and Managed Futures FundsIf the hedge fund trades in one or more of the following: spot forex, managed futures or commodities, futures contracts, commodity options (including options on futures contracts), leverage contracts involving certain precious metals, futures contracts and commodity options traded on a board of trade, and/or foreign futures and foreign options and has U.S. investors and charges performance and management fees, then the hedge fund manager has to register with the National Futures Association (NFA), unless an exemption from registration is available. Incubator hedge fund trading spot forex, managed futures and commodities can operate under NFA Rule 4.13(a)(1). We offer NFA registration services and a filing service for NFA exemptions. Recently, the NFA eliminated the exemption contained in Rule 4.13(a)(4)--a rule relied upon by a substantial portion of the hedge fund industry. Hedge fund managers operating commodity pools under Rule 4.13(a)(4) have until December 31, 2012 to register as commodity pool operators, unless they can avail themselves of some other exemption. Learn More About NFA Registration
How long do I have to operate an incubator fund before marketing the fund to investors? Incubator hedge funds you to create solid track records within the structure of a real hedge fund. The incubator hedge fund assets are managed about 3 to 18 months. Ultimately, there are no hard and fast rules. It is our experience that fund managers typically incubate their hedge funds for a short period of time and then convert the fund to a full-fledged hedge fund. The better the track record, the more attractive the investment will appear to prospective investors. If investors are ready to go, why wait? Set up the full-fledged hedge fund.
Can I have multiple incubator hedge funds? Yes. Can I gather indications of interest from potential investors during the incubation phase? Yes. Performance information about the incubator hedge fund can be provided to preexisting and potential contacts at any point after the fund's inception. You can gather indications of interest through your personal network, friends and family (i.e., persons with whom you have a pre-existing relationship). Learn More About Attracting Investors
Our Customers I would like to state unequivocally that I have had a completely positive experience in dealing with Capital Management Services Group. Truly, from the first phone call that I made to Capital Management, to the conference call that was arranged with Hannah Terhune, the time she took in answering all of my questions, and, finally, to the follow-up by Amy Hong. My case involved the establishment of a Forex Incubator Fund, and was thoroughly handled. Hannah Terhune responded promptly to my subsequent phone calls and Amy Hong is absolutely 100% efficient. I, certainly, plan to enlist Capital Management's services for my legal needs in the future concerning fund management. I would rate my experience and results 5 out of 5 stars! Totally satisfied, Rxxxxxx Sxxxx, Sept.22, 2010
Only someone who qualifies as an active securities trader can elect MTM treatment. Although the MTM election can be made in a year in which you qualify as an active trader, the MTM election once made applies to subsequent years whether or not you are an active trader in later years. Learn More About Mark-to-Market Election
Can I seed the incubator fund with my IRA? Yes. Find a very flexible IRA custodian. You will need to form a separate special purpose LLC to facilitate your IRA's investment into your incubator fund. If you use margin to trade, do not use your IRA as seed capital or set up an offshore incubator fund. When seeding an offshore incubator hedge fund with an IRA, a more complex approach is needed. For the structure to be effective, you will move your IRA account to a financial custodian (e.g., you would roll over your IRA and other retirement/tax advantaged accounts to an IRA custodian) that allows alternative investments. If the alternative custodian you select is not also a broker, you would then set up a LLC and list the IRA account as the sole owner. The LLC would be the self-directed IRA and be also be an investor in your new hedge fund. Once the LLC is funded with your existing IRA (the initial funding), you will not be able to add money from other sources to this LLC. This is a complex approach that requires careful drafting of the operating agreement so please call us for a free consult to avoid making any mistakes!
Can I operate more than one incubator fund? Yes. Some managers will incubate multiple funds in order to develop track records for different strategies. How much money do I need to seed the incubator fund? There is no minimum investment amount. You are just trying to create a performance percentage based on real time trading.
Our Customers I wanted to thank you and your staff for the professional and timely services that you provided in setting up a CTA business. As an individual trader for almost 20 years I have a full grasp of markets but had very little knowledge in setting up a trading business for clients. Everyone at your firm was extremely friendlyand helpful in giving me guidance in this new startup. Your prices were fair and while I looked at different firms to handle the process yours was head and shoulders above the rest. Thanks so much, Sxxx Sxxxr Managing Partner Sxxxxx Capital Management LLC. June 18, 2010
Can I open a trading account for my incubator fund at any brokerage firm? Yes. As soon as the hedge fund is formed you can open a brokerage account and begin trading. We obtain the EIN (tax identification number) of the fund and draft any banking and brokerage resolutions you need at no extra cost to you. Whether your hedge fund is formed in the United States or offshore, you will need a U.S. tax identification number to open a U.S. bank or brokerage account. Can I add or withdraw capital from an incubator hedge fund? Yes. The track record of the fund is measured as the percentage return of assets under management, regardless of the amount of capital contributed to or withdrawn from the fund. Learn More About Performance Reporting
Do I need an administrator during the incubator fund period? No. You do not need to buy accounting services to start and run an incubator fund. Postponing the need to hire an administrator is another advantage of initially establishing an incubator fund. Administrators are helpful with the support of a full-fledged hedge fund (e.g., providing net asset value calculations, preparing monthly reports, and calculating fees). Learn More About Hedge Fund Administration, Taxes and Audit
Should I set up an offshore incubator hedge fund?
Outside the United States, the rules governing incubator hedge funds are more relaxed; however the start-up costs are a bit higher. It also takes a little longer to set up an offshore incubator hedge fund. In addition, when you are ready to convert an offshore incubator hedge fund to a full-fledge hedge fund, you will find that it takes more time and mental effort to do so (due to foreign regulatory issues) than it does in the United States. Learn More About Offshore Hedge Fund
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. 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. A U.S. presence is not required.
How are U.S. Incubator Hedge Funds Taxed? The U.S. incubator fund is taxed as a pass-through entity for U.S. tax purposes. This means that the incubator fund's realized gains and losses are taxed at the investor level. The tax character (i.e., ordinary income or capital gain treatment) of the gains and losses pass through to the investor level as well. Learn More About Hedge Fund Taxation
How are Offshore Incubator Hedge Funds Taxes?
Offshore incubator hedge funds are generally set up as corporations in tax-free countries. A tax election can be made so that U.S. investors can treat their interest in an offshore corporate fund as a partnership interest for U.S. tax purposes. However, this is not recommended if the fund trades on margin and the U.S. investors are tax-exempt. Learn More About Hedge Fund Taxation
Our Customers I have had the fortune of working with Hannah Terhune and Capital Management Services on the setup of my hedge fund. As a well funded start up with offshore and onshore investors I needed someone who could help me and my investors navigate the complex tax, regulatory and set up requirements. Her firm supported us each step of the way and we were incredibly impressed with her knowledge, experience and execution. What could have been a very difficult and lengthy process was seamless, well managed and cost effective. We will continue to use Hannah as we grow our assets and would have no hesitation in recommending her to both start up and established managers. Thanks. Warren January 26, 2010
Why Hire Us? When you engage us for hedge fund you get a unique combination of securities, tax, and international experience, focused on the trader niche. We have established a leadership position with traders. We are one destination for all your very 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, because we understand that our customers want to begin their money management business as soon as possible. We conceive, structure, and deploy the best tax saving strategies into your hedge fund vehicle (for the benefit of the manager and their investors) and your management company. Investors value tax-savings strategies and we utilize all our special knowledge and ideas in this area. Our customers value our one-stop relationship. We will help you start your business and continue to assist you. Our tax services division handles accounting, software, and tax compliance, including all tax matters (tax planning and tax returns). Only one thing counts with us and that's our customer relationships!
Customer Testimonial Hannah: You and your team delivered what you promised--on time and on budget. You all were were attentive and professional in every respect, and I appreciate your effort, advice and guidance very much. It was a pleasure working with you, and I would recommend you to others without reservation. Best Regards, PB. January 18, 2010
CapitalManagementServicesGroup.com is recognized by discriminating fund managers and businessmen as being the foremost tax and legal authority in the business. Attorney Hannah Terhune's education and experience are unsurpassed in the area of hedge funds creation and management platforms, and the complex body of related tax laws. Ms. Terhune's extensive knowledge and experience have made her an indispensable resource for serious hedge fund and business professionals. Ms. Terhune's articles on the subjects have appeared in over 100 publications worldwide. Chances are, if you have read about the above matters, Ms. Terhune has written about them.
Give us the opportunity to use that knowledge and experience for you. We have both regulatory experience and the understanding of the foreign exchange and securities markets. We know how to navigate the compliance with rules and regulations in the United States as well as in regulated jurisdictions such as United Kingdom, Singapore, Hong Kong, Canada and the British Virgin Islands. Each client receives personalized attention from our attorneys and staff. No client is too large or small though because of our boutique size. We pride ourselves in providing personal attention to each client.
CMSG provides the best services and support needed for hedge funds and business projects. No need to coordinate work between different firms--we handle the entire business process from start to finish. We offer accounting, tax planning services, tax return preparation, business consulting, and U.S. and international company formation services. Our professionals provide the highest 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. Read our Leading Media Articles, Customer Testimonials and learn more About Us.
Personal Consultations You 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 consult 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 over-estimated. The expertise required to recommend best solutions and provide sound advice should never be taken lightly. We are confident that when you are finished with your consultation, you will be impressed and more informed about your business plans than ever before. Call (307) 213-4732 or Click Here to Request Services. Our Commitment Henry David Thoreau wrote: "Do not hire a man who works for money, but him who does it for love of it." We are committed to your business plans and bringing you the best possible options. We are an established and internationally recognized business that serves and educates our clients throughout the industry. We do this by striving for the best results. Above all, we are a law firm. A lawyer is a philosopher and role model. The ability to improve our clients' lives is a privilege that we do not take lightly. There is tremendous power in being able to effect a positive change in our clients' lives. Our aim is to welcome our clients and to provide a comfortable, warm environment for all. Thanks for visiting our website. We hope to have the opportunity to serve you.