The hedge fund industry’s enthusiasm for the JOBS Act has been tempered by the recognition that while the law and related rules expand the opportunities for advertising by managers, they do not alter much of the long-standing authority governing such advertising.  See “Schulte, Cleary and MoFo Partners Discuss How the Final and Proposed JOBS Act Rules Will Impact Hedge Fund Managers and Their Funds,” Hedge Fund Law Report, Vol. 6, No. 29 (Jul. 25, 2013).  In particular, the JOBS Act rules did not abridge or relax the regulatory regime governing performance advertising by hedge fund managers.  See “A Compilation of Important Insights from Leading Law Firm Memoranda on the Implications of the JOBS Act Rulemaking for Hedge Fund Managers,” Hedge Fund Law Report, Vol. 6, No. 30 (Aug. 1, 2013).  Norm Champ, the Director of the SEC’s Division of Investment Management, emphasized this point in a September 12, 2013 speech at the Practising Law Institute, cautioning, “I’ve instructed Division of Investment Management rulemaking and risk and examination staff to pay particular attention to the use of performance claims in the marketing of private fund interests.  In particular, this review will endeavor to identify potentially fraudulent behavior and to assess compliance with the federal securities laws, including appropriate Investment Advisers Act provisions.”  What hedge fund managers can and cannot do in the course of performance advertising is the product of law, SEC rules, no-action precedent and decades of practice; it is largely a function of principles and experience rather than explicit or rules-based guidance.  At the same time, performance remains a dominant factor in the capital allocation decisions of institutional investors.  See “Goldman Prime Brokerage Survey Relays the Views of Institutional Investors on Hedge Fund Fees, Manager Selection, Due Diligence, Return Expectations, Liquidity, Managed Accounts, UCITS and Alternative Mutual Funds,” Hedge Fund Law Report, Vol. 6, No. 25 (Jun. 20, 2013).  Accordingly, hedge fund managers want (and need) to know how to put their best foot forward in performance advertising without causing that foot to trip a regulatory wire.  And in analyzing this area, managers are particularly concerned with whether they can advertise using gross performance results; if so, how; and, if not, how to calculate and present net performance results in a way that passes legal muster while still reflecting positively on the manager.  This article is the first in a two-part series that aims to help managers think through these and similar questions relating to the calculation and presentation of performance results in marketing, advertising, governing documents and other contexts.  Specifically, this article provides an overview of relevant law and SEC guidance (including relevant no-action letters), and offers practical guidance on calculating and presenting net performance results.  The second installment will identify situations in which managers may, consistent with relevant regulation, present gross performance results; outline the mechanics of calculating and presenting performance results in a number of challenging scenarios that hedge fund managers regularly face; and describe best practices for hedge fund managers in presenting their performance results.