Corporate Finance & Securities

Hedge Fund Accredited Investors

We are continuing our series on understanding hedge funds; we will be discussing the definition of “accredited investors” and why it is important to your hedge fund.

As a brief primer, you should know that all hedge funds considering a securities offering must comply with federal and state securities laws. The Securities Act of 1933 and 1934 (“Acts”) were put in place to protect investors after the market crashed in 1929, and prior to this point in time, securities were chiefly governed by state law (which still applies in may situations). The two main objectives of the Acts were: 1) to require that investors receive significant (or “material”) information concerning securities being offered for public sale; and 2) to prohibit deceit, misrepresentations, and other fraud in...

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Corporate Finance & Securities

Hedge Fund Side Pocket Accounts

This is our fourth post in our series on understanding hedge funds. Today, we will be discussing hedge fund “side pocket accounts.”

Generally, a side pocket is an account that is established by a hedge fund to segregate certain assets or investments from the fund’s general portfolio. Often, side pockets are used to hold less liquid securities such as real estate and private equity investments. Hedge fund formation documents may specifically permit the use of side pockets, which are used by fund managers to isolate investments often until market conditions improve and the assets can be sold at prices that better reflect their intrinsic value.

The side pocket account is simply an entry on the hedge fund’s books that is tracked separate...

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Corporate Finance & Securities

Hedge Fund Series I Part 3 I The High-Water Mark Provision

This is our third post in our series on understanding hedge funds. Today, we will be discussing the specifics of the high-water provision and how it seeks to provide proper incentives and fair compensation for both parties to a hedge fund.

As discussed in our first post on hedge funds, most hedge fund managers charge clients a performance fee between 10-40% of returns, with an industry standard of 20%. Performance fees are the fees that a hedge fund manager charges for successful investment returns. For example, if a hedge fund portfolio returns 25% in a given year, the hedge fund manager may charge investors a 20% performance fee on top of his management fee (typically 1-2% of assets). So, if an...

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Corporate Finance & Securities

Hedge Fund Series | Part 1 | What is a Qualified Client and why is it important for my hedge fund?

This will be the first substantive post in our series on understanding hedge funds. Today, we will be discussing the definition of “qualified client(s)” and why the definition of qualified clients is important to your hedge fund.

Performance Fees and the Qualified Client

Most hedge fund managers charge clients a performance fee between 10-40% of returns, with an industry standard of 20%. Performance fees are the fees that a hedge fund manager charges for successful investment returns. For example, if a hedge fund portfolio returns 25% in a given year, the hedge fund manager may charge investors a 20% performance fee on top of his management fee (typically 1-2% of assets). So, if an investor invested $100,000 and the fund returned 25%,...

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Corporate Finance & Securities

Series | Understanding Hedge Funds

In this iVLG blog series, we discuss setting up and managing a hedge fund. We know that forming a hedge fund can be a complex and difficult task, especially with the number of regulations affecting hedge funds, their managers, and their investors. Our goal is to help you understand what it takes to set up a hedge fund, the key provisions contained in the securities documents typically associated with a hedge fund, and how to properly vet your investors.

The hedge fund series will breakdown the following:

Accredited Investor v. Qualified Client Requirement Entity Structure Performance Fees Side Pocket Accounts

We will update this page with the link to the post as the posts are completed. Please feel free to comment below if you’re looking for additional information...

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Business Startup

iVLG News Roundup Week 49: UBS Fraud, Sprint Acquisition, Nordstrom Sells, Best Buy Delays

Mergers and Acquisitions

Sprint Offers $2.1 Billion for Clearwire The mobile giant Sprint Nextel Corp. offered $2.1 billion to purchase the remaining 50 percent of Bellevue-based Clearwire Corp. Who owns the other 50 percent? Sprint.

Sprint is offering $2.90 per share to buy the 700 million outstanding shares, according to the SEC filing. As a result, Clearwire’s shares jumped during early trading, up 35 cents to $3.10. This offer comes just months after Sprint purchased Clearwire’s co-founder, Craig McCaw’s shares.

Best Buy Gives Founders More Time to Bid The electronics retailer, Best Buy, announced that it plans to give its founder, Richard Shulze, until February 28 to make a takeover bid for the company. Schulze and his private equity partners will have the chance to...

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Business Startup

iVLG News Roundup Week 40: Mergers & Acquisitions, Securities Regulation, and Housing

Mergers and Acquisitions

Exxon Mobil Buys Canadian Oil and Gas Company Oil giant Exxon Mobil agreed to terms on Wednesday to purchase Canadian oil and gas company Celtic Exploration. Exxon is paying roughly $3.1 billion in cash and stock. Exxon has been actively seeking to expand its presence in the energy-rich shale that is in western Canada.

The deal includes Exxon paying about $24.5 Canadian dollars ($24.92 USD) per share, which is roughly 35 percent above the Canadian company’s closing price. Celtic investors will also receive .5 of a share in a new company that will be led by Celtic’s current management team.

Microsoft Makes Two Deals in Two Days Microsoft announced Wednesday that it has closed a deal to acquire MarketingPilot Software, LLC, a...

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Business Startup

iVLG Blog News Roundup Week 33: Securities Laws; Insider Trading; Mergers & Acquisitions; etc.

Securities Law

SEC Further Delays Ruling on Title II of JOBS Act The SEC Chairman Mary Schapiro has informed members of Congress that the SEC will delay implementing rules that would give effect to Title II of the JOBS Act, which will remove the general solicitiation ban of securities offered under Rule 506. The Wall Street Journal is reporting that the coming changes to Rule 506, which were thought to be taking effect as early as August 22nd, will not take effect until this fall at the earliest. Rather than implementing interim rules, the SEC will submit proposed rules and solicit comments on the proposed rules. Representative Patrick McHenry wrote a letter to Chairman Schapiro relating his frustration that implementation of the...

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Business Startup

News Roundup 2012 Week Two: Securities Regulations; Executive Compensation; SOPA Protests; Regional News; Koomey’s Law

Hedge Fund Managers Petition SEC to Remove Prohibition on General Solicitation Under current regulations, issuers of securities in private placements are restricted in how they can solicit potential investors. The Managed Funds Association has petitioned the SEC to eliminate the prohibition on general solicitation and advertising in Regulation D under the Securities Act of 1933 (“Securities Act”) for offerings or sales by private funds. In the petition the MFA points out that the regulations prohibiting general solicitation are vague, and argues that the uncertainty surrounding the vague rules is harmful to business. For an in-depth look at the petition check out Jim Hamilton’s blog.

Executive Compensation: Discovery Channel’s New CFO Gets Paid to Join and to Leave The Discovery Channel filed their 8-K...

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