Hedge Fund Documents: What to Expect

Hedge Fund Documents:  What to Expect  

Are you considering investing in a hedge fund?  This can be a sizable investment, so you want to look over hedge fund documents before you invest one penny of your hard earned money.  Where large, and highly specialized, investments are concerned there are usually a lot of documents to look over.  Knowing what the different documents are and what to expect will help you make sense of all of the information that you are given when you are considering investing and then when you make your initial and any subsequent investments in the fund.

Luckily, there are some very standard hedge fund documents.  These standard documents make it easier to understand what you are looking for when you have many different hedge fund documents, but some funds will have additional documents.  Generally speaking hedge fund documents will include at a minimum but may not be limited to:

♦ Partnership or operating agreement

♦ Private placement memorandum

♦ Investment management agreement

♦ Placement agent agreement

♦ Subscription agreement

♦ Formation agreement

Additionally you may receive checklists associated with the hedge fund or hedge fund documents.  These may included but are not limited to:

♦ Formation checklist

♦ Investor negotiation checklist

♦ Documents checklist

♦ Distribution checklist

♦ Structure checklist

♦ Service provider checklist

♦ Investment policy checklist

♦ Regulations checklist

As you can see, there is a lot of information included in or involved in hedge fund documents.  You want to make sure that you are given time to read through all of the documents so you understand everything little thing about it.  If you don’t understand something that is stated in the hedge fund documents you should inquire with those who set up the fund or you should meet with your financial adviser or lawyer to help you better understand.

Having all of this information up front can be very overwhelming.  Take your time going through it to ensure that you understand where your money is going, how the fund will be marketed, what the payment structure is, and so on and so forth. Doing this will allow you to avoid surprises later. So you can make a well advised investment to mitigate some of the risk.