Fund raising and investment, Financial Management

Fund Raising and Investment:

Fund commitment requirement in Hedge Funds sometimes exceeds millions of dollars. In addition, high minimum investments are sometimes closed to new investors due to capacity constraints and close-ended nature of the Fund. Hedge Funds also limit the number of investors due to regulatory constraints. For example in the US, the Hedge Funds limit the number of "accredited" investors up to 100 (provided that not more than 35 investors are non-accredited investors with the rest being accredited investors) or number of "qualified" investors up to 500. If it exceeds this limit, then the Fund will be treated as a mutual fund and has to comply with the SEC rules and regulations followed by a mutual fund. As a result of all of these rules, Hedge Funds are typically arranged as a partnership of 100 "accredited investors" or a partnership of up to 500 "qualified purchasers" (or "super-accredited investors").

However, large Hedge Funds allow only investors having good track records and ability to maintain long-term commitment in the present Fund and probability for investment in Funds that are to be offered in future. This closed nature will restrict new investors from accessing large funds. The alternative route for the investors is Fund of Funds (FoFs), and is the only way to gain exposure to those Funds. Generally, Hedge Funds are offered with minimum investment horizon of three-year lock-in period. On completion of lock-up restriction, investors can exit by liquidation, redemption or transfer of holding to the Fund or other genuine investors.

 

Posted Date: 9/11/2012 2:13:35 AM | Location : United States







Related Discussions:- Fund raising and investment, Assignment Help, Ask Question on Fund raising and investment, Get Answer, Expert's Help, Fund raising and investment Discussions

Write discussion on Fund raising and investment
Your posts are moderated
Related Questions
I am looking for assignment help on the topic Structure and Organization of Treasury. It would be great if anyone help me.

Fund of hedge Funds The universe of Fund of Funds (FoFs), often referred to as Fund of Hedge Funds, continues to grow from Year 2000, both in absolute terms and as a relative c

Your firm will produce widgets for the next 10 years (starting at t=1). Annual revenue from selling widgets is $20,000. Production requires an initial outlay (at t=0) for machin

Q. Explain demerits of accept-reject criteria? Demerits of ARR:- (i) It utilizes accounting income rather than cash flows: - The principal short coming of ARR schema is th

What are the pros and cons of commercial paper relative to bank loans for a company seeking short-term financing? Commercial paper is generally a cheaper source of short-term fin

Write down what processes and data you would analyse when looking at the following scenarios and write down any improvements you could include to ensure that the problem would be l

Explain in brief about Financial management These tools help the manager to figure out which sources offer the lowest cost offunds and which activities will provide the greates

A/A2 is generally the second- or third-highest rating that a rating agency gives to a security or carrier. This rating indicates that there is a comparatively low risk of default a

What are the main implications of ownership rights by equity claims? Ownership rights have two primary implications: a. First, equity holders can advantage by any raise in t

As you checked the Answer Key to Question 6 in the Mastery Check from this lesson you may have noted that each year's net cash flows are calculated by adding depreciation back to n