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Domestic Hedge Fund Start-Up
Private Equity Fund Start-Up

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Domestic Hedge Fund Start-Up Checklist
General Procedures
  • Clarify your investment strategy and unique edge
  • Develop a business plan, including cash flow projections and a timeline for execution
  • Select external consultants: independent accountant, attorney, prime broker, fund administrator, custodian
  • Select a name for the operating entities (general partner/managing member/investment manager) and the fund(s)
  • Select members of management team (Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Compliance Officer, etc.) including outsourcing services
  • Set-up shop: banking relationships, office space, business equipment, trading accounts, staffing, IT/website, etc.
  • Structure compensation, profit sharing, and retirement plans
  • Consider disaster recovery plans
  • Purchase adequate business, life and health insurance
  • Consider forming an Advisory Board
Preparatory Steps
  • Determine legal entity, structure (onshore, offshore, parallel, master-feeder vehicles) and appropriate jurisdiction
  • Evaluate registration options and costs to assure compliance (SEC, CFTC, NFA, FINRA, etc.)
    • Blue sky laws
    • Potential regulatory changes
  • Determine the provisions to be included in your offering documents
    • Capital transactions
      • Subscriptions
      • Redemptions
      • Lock-up periods/gates/suspensions
    • Allocation of profits and losses
      • Incentive allocation or fee
      • High-water marks, loss carry-forwards, hurdle rates and claw-back clauses
      • Side pockets
      • New issues
    • Management fee
    • Portfolio Valuation
  • Determine the year-end tax reporting needs
  • Consider for tax purposes
    • Aggregate vs. layering approaches for maintaining records
    • Trader vs. investor
    • Section 475 election
  • Establish compliance, risk and valuation guidelines
Document Review
  • Prepare and review with appropriate parties
    • Offering Memorandum
    • Subscription Agreement
    • Partnership Agreement
    • Prime Brokerage Agreements
    • ISDA Agreements
    • Custody Agreements
    • Counterparty Risk Agreements
    • Compliance, Risk and Valuation Guidelines and Manuals
    • Due Diligence Questionnaire
    • Marketing and Website Materials
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