A hedge fund is a pooled investment fund that seeks maximum absolute returns by undertaking a wider range of investment and trading activities than traditional long-only investment funds.
Hedge funds are usually a private partnershipopen open only to a limited range of professional or wealthy investors who meet certain criteria set by regulators, and are accordingly exempted from many regulations that govern ordinary investment funds. The exempted regulations typically cover short selling, the use of derivatives and leverage, fee structures, and the rules by which investors can remove their capital from the fund. Light regulation and the presence of performance fees are the distinguishing characteristics of hedge funds.
Regulation D under the Securities Act of 1933 define an Accredited Investor as:
-
Is a natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of the purchase exceeds $1,000,000;
-
Is a natural person who had individual income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 in each of those years and has a reasonable expectation of reaching the same level of income in the current year;
-
Is a director, executive officer, or general partners of the company offering or selling the securities;
-
Is a business in which all the equity owners are accredited investors;
-
Is any organization with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities being offered;
-
Is any trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities being offered, whose purchase is directed by a sophisticated person; and
-
Is a non-profit organization with assets in excess of $5,000,000.
Loading ...
