The Hedge Fund Law Report

The definitive source of actionable intelligence on hedge fund law and regulation

Articles By Topic

By Topic: Investment Minimums

  • From Vol. 6 No.24 (Jun. 13, 2013)

    Why and How Do Hedge Fund Managers Set Minimum Subscription Amounts? (Part Two of Two)

    Minimum subscription amounts do more than govern the dollar threshold required for access to a hedge fund.  In addition, minimums communicate information about the manager’s strategy and goals; inform the composition of the investor base; enable and limit performance; impact the pace and productivity of marketing; and constrain fund liquidity.  This is the second article in a two-part series digging deeply into the important but often overlooked topic of hedge fund investment minimums.  Generally, this article explores market practice in this area.  Specifically, this article discusses the market for investment minimums and related terms; trends with respect to minimums; application of minimums in different factual contexts; whether investment minimums apply to follow-on investments; and manager practice for enforcing, waiving and modifying minimums.  The first article in this series addressed primary legal, business and investment rationales for setting hedge fund investment minimums.  See “Why and How Do Hedge Fund Managers Set Minimum Subscription Amounts? (Part One of Two),” The Hedge Fund Law Report, Vol. 6, No. 23 (Jun. 6, 2013).

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  • From Vol. 6 No.23 (Jun. 6, 2013)

    Why and How Do Hedge Fund Managers Set Minimum Subscription Amounts? (Part One of Two)

    If hedge fund investor capital is so hard to raise these days, shouldn’t managers take any capital they can get?  The short answer is, not if one dollar of investor capital costs two dollars in administrative fees, three dollars in litigation costs or four dollars in reputational impairment.  While ubiquitous in PPMs and thus largely ignored, hedge fund investment minimums nonetheless play an important role in hedge fund operations, marketing and portfolio management.  Such minimums communicate information about the manager, its investor base and its goals; both facilitate and constrain performance; impact the pace and quantity of capital raising; and influence the manager’s ability to manage liquidity.  Investment minimums are more important than generally understood, yet they have received a minimum of attention.  This two-part article series remedies that omission by focusing squarely and deeply on hedge fund investment minimums.  This article – the first in the series – outlines key legal, business, and investment rationales for setting hedge fund investment minimums.  Part two of this series will discuss market terms and trends for investment minimums as well as mechanics of implementing, enforcing, waiving and modifying minimum subscription amounts.

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