Hedge funds are one of the most dynamic, and important, players in the financial services industry and command worldwide attention. This primer, authored by a leading financial services industry participant, sets out the context of hedge funds and provides you with practical advice on how they operate.
It begins by defining the characteristics and functions of a hedge fund, illustrating who is involved both internally and externally. It goes on to provide a step-by-step guide to setting up a hedge fund and discusses how unregulated hedge funds are regulated.
It looks at hedge fund litigation and directs you to recommended resources. All of this is combined in a format that will enable you to grasp this important, complex subject relatively quickly. Aimed at newcomers to the hedge fund industry, this introductory text is particularly useful for:

• new hedge fund directors who have not previously served on a hedge fund board;

• investors seeking to learn about hedge funds;

• investment bankers that are transferring into a prime brokerage team;

• accountants responsible for hedge fund advisors;

• long-only fund managers that have been asked to co-manage a new long-short global equity hedge fund;

• anyone interested in understanding how a hedge fund works.

Introduction

1 Hedge Funds: What Are They?
What is a hedge fund?
Alternative investments
Private equity
Types of hedge funds
Hedge funds globally
Service providers
Should hedge funds be defined and regulated?
Do hedge funds pose risks?
What type of hedge fund will feature in this book?

2 Types and Structures of Hedge Funds
Corporate, limited partnership and unit trust models
Oversight
The securities of hedge funds
Strategies and weighting
Restrictions
Funds of hedge funds
Hedge fund variants

3 What's in an Articles of Association, a Limited Partnership
Agreement or a Unit Trust Agreement?
Sources of law
Incorporation and capital structure
Memorandum
Articles

4 Setting up the Hedge Fund
Planning the hedge fund
Identifying service providers - the RFP process
Requests for Proposals
Selecting the prime broker
Selecting the administrator
The investment manager
The selection process

5 Hedge Funds and Service Providers
The investment manager
The administrator
The prime broker
SLAs

6 How to Read an Offering Memorandum
Drafting
What goes into an Offering Memorandum?
Cover page
Important information
Directory
Definitions
Summary (or key features)
Investment objective, policy and restrictions
Management
Service providers
Subscriptions
Net asset value
Fees and expenses
Risk factors
Conflicts of interest
Reports
Master fund issues
Taxation
General and statutory information
Appendixes
Private placement memorandum
Verification

7 How are Shares or Interests in a Hedge Fund Marketed?
Private placements
Investors
Due Diligence Questionnaires
Distribution
The subscription process
Equalisation

8 How is a Hedge Fund Operated?
Preparations for launch
Initial offering period
Research and fund management - and fiduciary duties
Trading
Prime brokerage
Administration
Compliance
Directors
Hedge fund indexes and informational services

9 Key Issues: Valuations, Corporate Governance and Side Letters
Valuations
Corporate governance
Side letters

10 What Happens When Something Goes Wrong?
Valuations
Collateral
Prime broker conflicts of interest
Loss of key employees
Risk management
Redemptions
Adding or changing service providers
Insolvency

Appendix 1. Example Articles of Association
Appendix 2. Documents to Launch a Cayman Islands Hedge Fund

Index
                                                                   

Mark Berman the founder and a principal of CompliGlobe Ltd., advises and has advised hedge funds, investment managers, multi-national banks and investment firms on cross-border regulatory, compliance and AML matters. He is the editor of and a contributor to Hedge Funds and Prime Brokers (Oct 2006, Risk Books) and SEC Regulation Outside the United States (6th ed. Dec 2007, Risk Books).

He founded and chairs the annual conference, “SEC Regulation Outside the United States”, and the workshops, “SEC Basics” and “SEC Inspections and CCOs”, given annually in London, Hong Kong and other locations in Europe and Asia. Mark was a senior lawyer with the Division of Corporation Finance and the Division of Market Regulation of the US Securities and Exchange Commission, where he worked on domestic and cross-border disclosure and trading practices issues, respectively.

He was a senior lawyer with the London Stock Exchange where he advised on market supervision, surveillance, commercial and inter-exchange and regulatory matters, drafted the 1994 re-write of the trading rules and negotiated the Exchange-Thomson-ISMA inter vendor link agreement. In nearly 15 years of industry experience and apart from his time as a regulator, he held positions as head of legal and compliance, compliance officer, MLRO and assistant company secretary, and chaired and served on new product committees.

Mark writes articles, conducts training programmes on and speaks regularly at local, regional and global seminars on hedge fund developments and cross-border regulation. He is a Trustee of the SEC Historical Society and a member of the BSF Hall of Fame