Inside a hedge fund
Prime brokers, custodians, auditors, seed capital and the investors and contracts that surround a fund.
- Accredited investors and qualified purchasers: who may invest in a hedge fund
Why access to hedge funds is restricted, the U.S. accredited investor definition under Regulation D including the 2020 amendments, qualified purchasers and qualified clients, how status is verified, and the equivalent concepts of professional and well-informed investors in Europe and the UK.
- Asset custodians: who actually holds a fund's securities
What custodian banks do for investment funds: safekeeping, settlement, asset servicing and reporting, the chain from central securities depositories to sub-custodians, segregation of client assets, the SEC custody rule, AIFMD depositaries and how custody differs from prime brokerage.
- Bridging the gap into hedge funds: roles, skills and routes in
A practical guide for students and career changers who want to work at a hedge fund: the main roles from quantitative researcher to operations, the skills each needs, education routes, how interviews typically work, building a credible research portfolio, and realistic expectations.
- Capital introductions: how prime brokers connect hedge funds with investors
What capital introduction teams at prime brokers do, why they exist, how events and meetings work, the rules on private fund marketing including Regulation D and the JOBS Act, AIFMD marketing in Europe, and what managers and investors should realistically expect.
- Clawback clauses: taking back pay and profits that were not really earned
What clawback clauses are in finance: general partner clawbacks in private equity, why hedge funds use high-water marks instead, deferred bonuses and malus at banks, Sarbanes-Oxley section 304, Dodd-Frank section 954 and SEC Rule 10D-1, and the practical limits of recovering money already paid.
- Family offices: how wealthy families manage money, and why they matter to hedge funds
What single-family and multi-family offices are, what services they provide beyond investing, how they allocate to hedge funds and direct investments, their regulatory treatment including the SEC family office rule, and the questions raised by the Archegos collapse.
- Fund auditors: what a hedge fund audit checks, and what it cannot
The role of the independent auditor of a hedge fund: what an annual financial statement audit covers, valuation and existence of assets, the SEC custody rule's audit provision, PCAOB registration, why the Madoff case made auditor quality a due diligence priority, and the limits of an audit.
- Prime brokers: what they do for hedge funds and why it matters who holds the assets
How prime brokerage works: financing and margin, securities lending for short sales, clearing and custody, reporting, capital introductions, the rehypothecation lesson of Lehman Brothers in 2008, Archegos in 2021, and why funds now use several prime brokers.
- Seed capital for hedge funds: how seeding deals work
What seed capital means for a new hedge fund manager: why first money is so hard to raise, who provides seed and acceleration capital, the typical economic terms such as revenue shares, lock-ups and capacity rights, governance and transparency conditions, and the trade-offs for both sides.
