Hedge Fund Prospectus Prospectus.com team of securities attorneys can draft your hedge fund Prospectus for virtually any jurisdiction worldwide. We are considered to be the most efficient, most cost effective (save money) and most proficient firm globally. Our team can prepare and assist in the filing of all hedge fund offering paperwork with regulators and we can help to launch the fund.
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Our industry leading firm specializes in hedge fund setup and document drafting for nearly all paperwork, including the prospectus, as required. We write hedge fund Prospectus Offering documents for various onshore and offshore jurisdictions and for numerous hedge fund offerings for limited partnerships (LP or LLLP), LLCs (limited liability companies, open ended and closed ended funds, UCITS and umbrella structure and more. Our hedge fund documents conform to industry best practices and are utilized by hundreds of funds and law firms.
PPM, OM, Prospectus Offering Documents, Private Placement Memorandum In the United States, offering documents include a private placement memorandum (PPM, OM or prospectus), a limited partner (or limited liability company) agreement, and a subscription agreement. Offering documents for an offshore hedge fund include the private placement memorandum and the subscription agreement. If the hedge fund accepts, it should include a set of financial statements. If the hedge fund’s manager is registered as an with a U.S.
Federal or state regulator, the offering document will included a Form ADV Part 2, which describes the investment manager in detail. Although there are no specific disclosure requirements for offering documents, basic information about the hedge fund’s manager and the hedge fund itself typically, in fact is disclosed. The information provided is general in nature and it normally discusses in broad terms the hedge fund’s investment strategies and practices. For example, disclosures generally include the fact that the hedge fund’s manager may invest fund assets in illiquid, difficult to-value securities and that the hedge fund manager reserves the discretion to value such securities as it believes appropriate under the circumstances.
PPMs disclose any lock-up period that new investors must observe, as well as laying out the specifics for when investors will be able to redeem some or all of their investments out of the hedge fund. PPMs name service providers to the fund. PPMs may generally disclose potential conflicts of interest to investors, frequently under the heading of “Risk Factors.” The fund's offering materials and legal documents must clearly spell out the manager's approach to and include a description of the fee schedule; the exact formula used to calculate fees owed, and where appropriate, example calculations. Hedge fund fees should be calculated based on audited portfolio valuations. Where the period of audited financial valuations does not coincide with the fee calculation period, investors should familiarize themselves with the hedge fund manager's portfolio valuation methodologies and the processes used to prepare the fee calculation. Once audited financials become available, the fee calculations should be reviewed and adjusted for any valuation differences. Performance fees should be based on dollars of value added, not percentage returns or average capital invested for the calculation period.
Performance fees computed as carried interest should be calculated on net value added as opposed to gross value added. Offering documents should adequately define 'net value added' upon which performance fees are calculated (gross value added less any other expenses charged to the hedge fund). The PPM also may disclose that the adviser may exercise its discretion to invest fund assets outside the stated strategy or strategies. PPMs also discuss qualifications and procedures for a prospective investor to become a limited partner, as well as provide information about the hedge fund’s operations. PPMs discuss fund expenses, allocations of gains and losses, tax aspects of investing in the fund and may incorporate the hedge fund’s financial statements (see below for an outline of the contents of an offering document). Hedge Fund Offering Documents Offering Documents are the key to hedge fund sales. While there is no requirement that prospective accredited investors in a U.S.
Hedge fund be provided with offering documents, it is good (and common industry practice) to do so. Most hedge funds provide written information to their investors in the form of a private offering memorandum. This document—referring to both the prospectus and subscription agreement- goes by many names and acronyms including: private placement memorandum, PPM, Offering Memorandum, OM or prospectus (“PPM”). Whatever it is called, the PPM is an extensive document individually created for each hedge fund. Do you need a set of offering documents for your hedge fund? For a reasonable fee, we will draft customized offering documents for all types of hedge funds.
The disclosures in a PPM furnished to investors serve as protection to the principals against liability under the anti fraud provisions. Some of the information may be disclosed less formally in one-on-one conversations between investors and the hedge fund adviser. Hedge fund advisers may also provide information to hedge fund investors in the form of side letters, conference calls and financial statements. In addition, some hedge fund advisers may provide prospective investors with access to their prime brokers and other service providers, such as administrators, both during the investor’s initial due diligence of the hedge fund and subsequently.
Hedge fund investors must often spend significant resources, frequently hiring a consultant or a private investigation firm, to discover or verify information about the background and reputation of a hedge fund adviser. In practice, even very large and sophisticated investors often have little leverage in setting terms of their investment and accessing information about hedge funds and their advisers. Already Have Hedge Fund Offering Documents? We review offering documents for a small fee.
If you are not sure about the quality of the offering documents you prepared, we will read them and consult with you as needed to improve them. What is a Private Placement? The private placement memorandum (PPM) is a disclosure document that provides potential investors with the terms and conditions of the hedge fund. This document is similar to a business plan, except that the emphasis is on the disclosure of facts rather than projected results. A PPM includes a discussion of the terms of the offering, the allocation of proceeds, and the risk factors inherent in the business and industry.
In general, the memorandum must contain all information about the fund, the investment manager, and the securities offered, as well as any other information that would be considered 'material' by a potential investor. The PPM is accompanied by a subscription agreement and investor questionnaire. The subscription agreement is a contract to purchase a specified amount of securities at an agreed price, and contains a statement that the investor has received and reviewed the PPM, is aware of the risk factors, and is a suitable investor. The investor questionnaire elicits information about the investor's background, employment and investment or business experience. It is used, in part, to confirm the investor's accreditation and sophistication.
This document should be professionally prepared. Fiduciary Audits PPMs should be written with accountability in mind. Consider the PPM that states that “the goal of the fund is capital preservation.” Unless capital preservation is clearly defined in terms of asset allocation, one might expect that all of the fund’s assets consist of principal protected investments with specific maturity dates as such investment would most likely preserve capital. Given this PPMs should not state capital preservation as a goal unless the fund invests in items that return the principal investment. When used in a PPM, the terms “capital preservation,” “liquidity and marketability,” “risk aversion” need to be defined (and adhered to by the hedge fund manager) with a future audit in mind. In the future, there may be a trend toward investment policy audits (at the top levels of the hedge fund industry). An investment policy audit evaluates whether the hedge fund manager is in compliance with the statements made in the investment policy and investment strategy section of the PPM.
An asset allocation audit examines whether the fund’s portfolio is within the range of a PPMs stated asset allocations percentages. Capital Management Services Group, Inc. is recognized by discriminating business owners as being the foremost tax and legal authority in the hedge fund industry.
Attorney Hannah Terhune's education and experience are unsurpassed in the area of hedge fund creation, development and launch. Terhune's extensive international tax knowledge and hedge fund experience have made her an indispensable resource for serious hedge fund and business professionals. Terhune's numerous articles on the subjects have appeared in over 100 publications worldwide. Chances are, if you have read anything related to the hedge fund business, Ms. Terhune wrote it. When you engage us you get a unique combination of securities, tax, and global business experience. We think we have the best set of offering documents in the industry for hedge funds based on current and ever changing laws.
We aim to deliver quick turnaround times because we understand that our customers want to begin their money management business as soon as possible. We conceive, structure and deploy the best tax saving strategies for your hedge fund business. We will help you start your business as soon as possible and continue to assist you. Give us the opportunity to use that knowledge and experience for you. Each client receives personalized attention from our attorneys and staff. No client is too large or small for us. We pride ourselves in providing personal attention to each client.
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And offshore company formation services. We provide high quality services at competitive rates. But don't take our word for it, give us a call and let us prove what we can do for you. Personal Consultations You get answers to your specific questions by speaking directly to Hannah Terhune, an experienced hedge fund and international tax attorney. Terhune's hard-earned knowledge and experience can be put to work to save you unnecessary steps and costly wasted effort.
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How to Wri te A Prospectus – 10 Key Steps When Preparing Investor Offering Document for a Private Placement Prospectus Writing Here at Prospectus.com, we often compare the writing of a prospectus – or any offering document handed to investors, including a business plan – to a river. Your prospectus, whether for a private placement or public offering, should continuously flow, and hopefully at a smooth pace. Investors should not be bored or “turned off” by your writing, your structure and your style. When writing any corporate document that is to be given for investment consideration, even if it is a, you should put yourself in the shoes of the audience that will be considering the investment. Does your prospectus make sense? Is there an underlying message that compels a prospective investor to make an affirmative decision to invest in the company? Or, is the offering document taking the reader all over the place instead of flowing naturally?
The above questions, if not adequately addressed, can sink your chances of raising money. Our staff members have been involved in literally thousands of prospectus and offering memorandum writing projects. We frame your value propositions in a manner that is designed to grab investors’ attention from the onset of the document. Will ensure that your prospectus offering document is drafted with structure and style and in conformance with investment industry best practices.
If you are a startup, you’ll want to and contact us after! The Ten Rules for those Who Want to Write a Prospectus 1. Identify Your Investors While you may be asking why the investors come as number one, and what does that have to do with writing a prospectus, the answer is: everything. You are writing the prospectus for your specific audience. You must have them in mind when you begin the writing.
If you’re product or service relates to baseball, you do not want to write the prospectus from the standpoint that your investors are interested in space technology. Your investors are interested in baseball and generally sports. Thus, before you begin to write you must identify your investor target market. Profit Generation The entire point of a business and for those seeking to raise capital is to make a return, (i.e. To make money). Your prospectus, from the cover page, should convey a message that you can generate a profit for your investors.
It is obvious that any business plan or prospectus shows that the company can turn a profit, otherwise not many people would invest in a company that shows it will not make money. From the outset of the prospectus, you will need to convey that you can (honestly) generate a return on investment. Services or products that may generate small amounts of revenue may be viewed as a hindrance to others that generate much more. Focus on the core, money-making products and services and your prospectus will be that much stronger. Simplicity In addition to showing you can turn a profit, you will want to keep your prospectus flowing, no matter the length.
In most cases the simpler the prospectus the easier it is to convey your message. By “simpler” we mean staying on message, avoiding tangential, non-essential details and clearly explaining the product and services, and the market and the risk factors in a straightforward fashion. A good number of investors who will review your prospectus will jump from one section to another, often skipping information to look at a section they find more important. Because of this, you will want to create a prospectus that is easy to read, and from the first paragraph of any section, to convey the general idea of the subsequent information. You will need to factor in your analysis that an investor’s attention may only be grabbed in the first few lines of any section, and it is therefore imperative that you grab their attention immediately. Market A well written prospectus will detail the current and potential future market conditions of your products or services.
Many underestimate the importance of the overall market and potential market when writing a prospectus or private placement memorandum or another offering memorandum document. Investors want to see the current market, and if the company will be sustainable in a future market. The longevity of any business depends on the market size, the market reception to your service offerings and the future growth or decline of your industry. Scalability Prominently displayed and easily accessible in the prospectus should be the scalability of the company’s products and services.
One of the single greatest considerations investors give to any investment decision is the ability of the company to scale up. A good part of the capability for scaling will be conducive to market conditions, however a team that can navigate rough waters or a down economy will be a greater factor to scale than the market conditions. The prospectus or any offering document needs to show how the company can scale based on the current and future market, as well as the evolution of its products and services.
Team One of the most important sections of any prospectus is an overview of the management team and by extension who is running the company. This section will list the biographies of the key management of the company. It will be important to highlight the experience and qualifications the management team has to manage both the incoming funding (hopefully) while executing the business model. In addition to the management team, the prospectus will also indicate other key people who assist the company. For example, depending on the type of structure and the type of offering (equity versus debt), the legal team will be noted, as well as the underwriter(s), or the fund administrator or fund manager, the paying agent of the company and others.
Risks Any perceived risks or threats to the company’s business model should be detailed in this section of the prospectus. For example, an oil and gas exploration company may have specific risks such as drilling and finding no oil, or machinery decline, or no buyer for its supplies and so on. These are risks related to the industry. On a global scale, an economic recession could impact oil prices and the profitability of the company. On a more general scale, natural disasters could delay exploration and therefore the selling of product.
Regardless of the industry, all risks should be considered and included in the prospectus, which informs the market in good faith. Funding Requirements The funding requirements section of the prospectus indicates where you intend to allocate the funds you raise. It is a glorified use of proceeds area that will detail how the money will be spent. For example, if your company is in the oil and gas exploration field and you are raising $10 million, you might show that $5 million will go to purchase equipment, $2 million for refining the oil, $1 million for leasing the land to drill, $1 million for salaries and $1 million for working capital. The idea is that you will show what you need the money for and detail the expenditures. You are also required to allocate the funding specified in the prospectus to the area for which it is intended.
If you wish to revise the allocation of these funds, you may need to get board and investor approval beforehand. Lastly, you will want to discuss the potential for future capital raising initiatives in this section. Microsoft pdf printer windows 10. Financials This section of the prospectus summarizes the past, present and future financial position of the company.
It includes a current balance sheet with a profit and loss statement, as well as any pro forma statements about future revenue and expenses. In addition, depending on the type of entity and if the company is private or public, and within each of these there are different rules, the financial statements may need to be audited, or utilize an exemption from audited financials.
The financial section should indicate the fiscal responsibility of the company. Exit The exit strategy section of the prospectus is a vital part of the offering document. Any investor needs to understand and be comfortable with the details of their exit plan. For an IPO, the public offering itself is an exit. For private companies, the exit normally transpires when a company is purchased, but in most cases the company’s owners cannot just sell their own stake to a larger audience. The IPO allows for a larger buying pool, or a more liquid audience, as opposed to an illiquid company. The looking forward plan you offer on how to provide an exit for investors is probably the single most important factor any investor contemplates before providing capital.
Conclusion Writing a prospectus is an opportunity to show investors three important points. You should keep the following four questions in mind when writing your offering memorandum or prospectus:. What are you doing and why is this needed?. How to write a compelling prospectus that speaks to investors?. How to determine the amount of capital that should be solicited?. When will the investor realize their return and at what profit?
How to Write a Prospectus Read More. How to Write a Prospectus. How to Write a Prospectus for Investors.
What documents do I need to start a hedge fund? Most raise money through a private offering exemption under Regulation D of the Securities Act of 1933. Although Reg. D prohibits general advertising, fund managers do distribute certain documents to prospective investors. These documents are designed to give an investor a complete picture of the fund’s investment strategy as well as the risks of investing in the fund.
Having improper or incomplete documentation can subject a fund manager to the risk of regulatory intervention and civil liability, both of which may carry significant costs. Generally, a start up hedge fund requires a private placement memorandum, a limited partnership agreement or operating agreement, and subscription documents. If the hedge fund has multiple managing principals, these principals should generally have a management agreement or other operating agreement between themselves to define rights and responsibilities. Hedge funds that utilize third-party placement agents to solicit investors will also need additional documentation. Finally, hedge funds often develop collateral marketing material, including a “pitch book” and a “tear sheet” to provide an overview of the fund for prospective investors. All of the legal documents necessary to start a hedge fund should be drafted or reviewed by a with.