Hedge Fund Formation

[mickey]

Hello there, I'm Mickey and I'm new on board. Since 2012 I was active on TalkGold and now I'm very happy to be here to find some knowledge by professionals.

Now to my company:
I plan to setup a Hedge Fund. In order to save capital gain tax the company have to be in a offshore jurisdiction. Now I pay about 25-27% which reduces the gains and amount of following reinvestments massively and messes up my performance. Privacy is not so important (the company will be reported to my local tax office), but the location should be in or around Europe, so I can visit banks and authorities over there in person if required.

Bank & Investment Account:
It is very important to get accounts (checking and investment) maintained by prime investments banks like Barclays, Saxo, BNP Parisbas, HSBC, Deutsche etc. so the company body of the particular jurisdiction needs to be accepted by them. I had an almost zero acceptance-rate with Seychelles IBCs back in 2012 so I know what I'm talking about.

Do you know suitable jurisdictions in or around Europe with low capital gain tax (generated by Stocks, Options, ETFs, Funds, Bonds and Derivates) and some investment banks which accept their companies?


Best Regards: Mickey

 

[JohnLocke]

Welcome aboard

Have you looked into Cyprus as a possible jurisdiction?

 

[W4rhol]

Bulgaria have no CGT if you trade on a regulated market of the EU

 

[Martin Everson]

Since 2012 I was active on TalkGold and now I'm very happy to be here to find some knowledge by professionals.

Join the club. I was with talkgold since the days of e-gold.

Do you have any experience with working as a hedgefund manager or hedgefund advisor? Where are you expecting your customers to be located? If your an industry outsider put the idea to sleep...it 100% won't happen. However if you have experience even at a junior assistant level then a Luxembourg SICAV that is tax exempt works best. Setup is not complicated and finding a custodian bank not difficult. However no authority or bank will take you seriously unless you are an industry insider.

 

[mickey]

Welcome aboard

Have you looked into Cyprus as a possible jurisdiction?

Yes, no capital gain tax on shares from abroad countries (even if they are active the in real estate sector) and english language which are two strong pro's. One con are the banks especially after the Cypriot credit crisis 2012-2013. That's why Cypriot/Greek banks are no choice. I will check the foreign banks there and if there is an interesting one Cyprus will make it. Do you know some Banks (located on the European Mainland) which are accepting Cypriotic Ltds? I know many cases that Even German or Austrian GmbHs were not accepted by the brokers (for regular account not a margin account).

Bulgaria have no CGT if you trade on a regulated market of the EU

I'm unable to speak Russian or Bulgarian so I would not be able to do business there.

Join the club. I was with talkgold since the days of e-gold.

Do you have any experience with working as a hedgefund manager or hedgefund advisor? Where are you expecting your customers to be located? If your an industry outsider put the idea to sleep...it 100% won't happen. However if you have experience even at a junior assistant level then a Luxembourg SICAV that is tax exempt works best. Setup is not complicated and finding a custodian bank not difficult. However no authority or bank will take you seriously unless you are an industry insider.

It is even more complicated at these days and coming days. I work in that sector for about 11 years and back then I was clever enough to sell all stocks and take short positions in late summer of 2008 (just like I did two weeks ago). I was always a simple employee (Junior/Senior Hedge Fund manager with up to 50-100 Mio. under management) but even this background does not allow you to run a regular Hedge Fund. In Germany and other EU countries you need to be certified (even when you run a private and closed Hedge Fund) which requires to run a bank as a director for a couple of years. In other words you need to work and wait your whole life to archive this state. But there is a way around.
1. You need to manage your own money primarily. Which is my primary goal as well.
2. If you take funds from third parties to manage it you have to take their funds as a credit or bond for an interest rate. In this case you MUST pay back the funds at a certain date. If you don't you MUST file for bankruptcy. So the well known contracts of the industry like "Blablabla you give us your money to manage if for you but you take the complete responsibility for any losses." are impossible in that particular approach. Sure the investors will earn less gain (lets say 7% per year) but you can make 20% within a year with ease, even in high risk times like now in 2018.

 

[Martin Everson]

I have managed client assets for over 12 years now and I all I use is power of attorney over the clients account. What you describe is overkill.

 

[mickey]

I have managed client assets for over 12 years now and I all I use is power of attorney over the clients account. What you describe is overkill.

Do you manage the investment accounts of your clients? I already heard about that. Is that legal/official in your country? In which country you operate?

 

[Milky Moon]

Join the club. I was with talkgold since the days of e-gold.

Do you have any experience with working as a hedgefund manager or hedgefund advisor? Where are you expecting your customers to be located? If your an industry outsider put the idea to sleep...it 100% won't happen. However if you have experience even at a junior assistant level then a Luxembourg SICAV that is tax exempt works best. Setup is not complicated and finding a custodian bank not difficult. However no authority or bank will take you seriously unless you are an industry insider.

Correct. However you can buy all those connections, it is a cottage industry.

The first step for the promoter is to prepare the draft memorandum and articles of association, which will be used to set up the company, and will conform with the offering documentation.
The second step is to draft the offering document which sets out the terms of the offering of the fund's shares (offering memorandum).
The third step is to incorporate the exempt limited liability company with the Registrar of Companies and register the fund with the CIMA.

If you have less than 15 investors, you can skip registration with CIMA. Note, you will need at least €1,25mio into the Fund.

Setting up 1+2 properly will cost you approx €250k in fees.

 

[Martin Everson]

Do you manage the investment accounts of your clients? I already heard about that. Is that legal/official in your country? In which country you operate?

Yes I have power of attorney over the investment accounts in Switzerland and a couple with interactive Brokers. It is absolutely normal. In fact if you speak to any SRO (self regulatory organisation) member in Switzerland they would advise using power of attorney to manage assets until you have sufficient assets to be able to make it economical to register with an SRO. Power of attorney is legal in my country as it is in most European countries. Most wealthy people give limited power of attorney (LPOA) to their financial advisor or lawyer when opening accounts to oversee their affairs. I have in all my many years of banking never met a really wealthy person ($10m+) open an account without giving LPOA to a professional to produce reports, offer independent advice or for ease of doing their taxes.

 

[diablo]

Setting up 1+2 properly will cost you approx €250k in fees.

WOW you mean 250.000 euro ?

 

[Milky Moon]

WOW you mean 250.000 euro ?

Yes.