Investment Fund Types
There are two main types of Funds. Whether in the United States or Offshore, Akram specializes in providing tailored audit and assurance services to Hedge Funds both cost-effectively and with outstanding results.
Domestic (US) Alternative Investment Funds
A hedge fund or other alternative investment product can be formed as a single U.S. domestic fund, as a single offshore fund, or as a combined domestic and offshore fund. The decision regarding whether to use a US versus an offshore structure will be based primarily on the tax considerations and implications for prospective investors.
Domestic funds are also typically structured as either 3(c)(1) or 3(c)(7) funds, depending on the type of investors that the manager wants to serve. The references to 3(c)(1) and 3(c)(7) indicate that these funds are excluded from SEC registration as investment companies pursuant to Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act of 1940, which primarily regulates mutual funds.
The 3(c)(1) fund is geared mostly toward managers who will cater to high net worth or accredited investors, family offices, endowments, foundations, or funds of funds. A 3(c)(1) fund must keep the total number of investors at 100 or less.
A 3(c)(7) fund structure is used when a manager’s clients are primarily large institutional investors that the SEC considers to be qualified purchasers under the Investment Company Act. The maximum number of investors in a 3(c)(7) fund is 500.
Offshore Alternative Investment Funds
Offshore hedge funds can be domiciled in jurisdictions such as the Cayman Islands, Bermuda, the British Virgin Islands (BVI), Netherlands, Mauritius, Dubai, and among others. These low-tax or tax-free jurisdictions do not impose corporate-level taxes on offshore hedge funds. The investors are generally taxed in their country of residence. The manager typically selects the fund domicile based on investor sentiment regarding the regulatory regime of the jurisdiction.
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We understand that clients in the Alternative Investments arena are extremely prudent. At Akram, we provide high-end, tailored fund accounting services with careful planning and an unmatched responsiveness that only a boutique accounting firm like ours can deliver. Contact us today to learn more about our specialized assurance, advisory, and tax services for hedge funds, commodity trading advisors, private equity and venture capital funds, day traders, investors, family offices, and high net worth individuals.