[...]... VASAVADA December 2009 Taxation of U.S Investment Partnerships and Hedge Funds CHAPTER 1 The Arcane World of Hedge Funds and Investment Partnerships What Is a Hedge Fund”? So, what is a hedge fund really? A hedge fund” is an entity that offers “alternative” investments to investors, distinct from “traditional” investments in bonds and equities A general counsel to the Securities and Exchange Commission... nuances of accounting methodologies and policies for hedge funds Once the nature of hedge fund accounting is clarified, the last part of this book covers taxation of hedge funds The last chapters describe strategies as well as small matters of detail that would facilitate hedge funds in improving their tax efficiency Whenever there is a complex and multifaceted taxation, the issue of optimal taxation and. .. expert, on hedge fund structure, hedge fund accounting policies, and the taxation of hedge funds and investment partnerships I have written this book to document my acquired knowledge and discoveries, without the pretense of posing as a subject matter expert, with a view to improving the lives of future generations of MBAs, CFAs, and hedge fund managers who may otherwise have to struggle and take several... in the funds they manage and receive a management fee that includes a substantial share of the performance of the fund Advisers organize and operate hedge funds in a manner that avoids regulation as mutual funds under the Investment Company Act of 1940, and they do not make public offerings of their securities Hedge funds were originally designed to invest in equity securities and use leverage and short... strategies The world of venture capital funds, private equity funds, illiquidsecurities funds, and hedge funds is disjoint from the world of SECregulated mutual funds The latter is organized mainly for the benefit of small investors The overwhelming majority of U.S venture capital funds, private equity funds, illiquid securities funds, and hedge funds are formed as pass-through partnerships under the U.S tax... income profile of typical professionals: It encompasses those individuals with at least $1 The Arcane World of Hedge Funds and Investment Partnerships 11 million in assets and $300,000 of family income.7 This segment of investors is unlikely to raise the desired billions of dollars of capital for a mega hedge fund Accredited investors are typically folded into hedge funds through “wrap accounts” offered by... securities in their portfolios 16 Taxation of U.S Investment Partnerships and Hedge Funds Organization of an Offshore Fund Each offshore regime has different formats, definitions, and language for organizing tax-exempt hedge funds under their laws In most of the popular offshore locations, such as the British crown colonies in the Caribbean, there are three forms of organization offered: as a company, a mutual... growth of Google out of a personal project of Stanford University graduate students, also associated with early investment by Kleiner Perkins, would remain showcases Chapter 11 elaborates upon to the nuances and differences between hedge funds and venture funds, as well as primary aspects of pass-through taxation to taxable U.S Investors, and concerns regarding Unrelated 4 Taxation of U.S Investment Partnerships. .. complete formal and of cial definition of “Qualified Purchaser” is in Title 15 U.S.C Chapter 2D, Subchapter I, Section 80a-2(a)(51) “U.S.C.” stands for U.S Code, which is published to the Internet in its entirety by the U.S Government at www gpoaccess.gov/uscode/browse.html 12 Taxation of U.S Investment Partnerships and Hedge Funds whom adequate disclosure of the investment strategy and risks has been... colonies of the United Kingdom, such as the Cayman Islands, British Virgin Islands, and Bermuda, the Dutch colony of Netherlands Antilles, and so on These regimes offer credible legal protection to investors by a court system and laws of their mother countries, the United Kingdom and the Netherlands, while at the same time offering the benefit of complete exemption from taxation as well as the benefit of participation . class="bi x0 y0 w0 h1" alt="" Taxation of U. S. Investment Partnerships and Hedge Funds Taxation of U. S. Investment Partnerships and Hedge Funds Accounting. World of Hedge Funds and Investment Partnerships 1 What Is a Hedge Fund”? 1 U. S. Venture Partnerships 3 Types of U. S. Hedge Fund Entities and the U. S. Tax