INVESTMENT MANAGEMENT
ACCOUNTING

First, please read our investment management accounting and tax overview page.

When it comes to managing money for investors, you may either manage money on a one-by-one basis ("managed accounts"), or you may combine your investors’ money into a money-management vehicle such as a hedge fund. You save lots of money when you manage one pool of money in a hedge fund!

Managed Accounts
One-by-one money management eases your securities regulation needs, and you don't need a hedge fund or other money management investment vehicle for this business model. But most traders are not interested in this business model because they deem it unmanageable in terms of having to make the same trade in multiple accounts and having to pay the same commission in each account (at great duplicate expense and effort). Plus, you have to rectify each separate account, raising your accounting fees. Most brokerage firms require you, as the money manager, to be a licensed securities broker before they will grant you power of attorney to trade an investor's account. If you are a member of an LLC (hedge fund or other investment vehicle), the brokerage firm does not require you to be a licensed securities broker.

Hedge funds and investment vehicles require special accounting and reporting
When you pool investors' monies into one entity level trading account (e.g., hedge funds or other investment vehicles), you are required to do a proper entity level and also an investor level accounting of annual income, expenses, trading gains and losses. Entity level accounting is not complex, it's simply trade accounting plus general ledger items (expenses and fees). It's investor level accounting that's so challenging for hedge funds, and that's where our expertise is highly valued.

Entity level accounting
As a trader in securities, commodities and/or currencies, you are probably already familiar with "entity level accounting," as that is the same as what you do now to account for your annual trading gains and losses in your various accounts. You also are familiar with accounting for all your trading business expenses and portfolio income. For example, our industry leading TradeLog software program is an excellent solution to download all your trading transactions from your broker's Web sites and generate a full and proper tax accounting, including adjustments that may be necessary such as wash sales, mark-to-market accounting and section 481(a) adjustments. Learn more here.

However, hedge funds also need investor level accounting and TradeLog is only designed for retail traders. See our overview page for how we handle accounting for hedge funds; with or without prime broker reports, and with or without specialized hedge fund accounting software (which we sell and use).

FundCount software
Investor-level hedge-fund accounting is complex and consumer accounting programs like QuickBooks don’t offer that type of accounting functionality. Hedge funds also require full general ledger accounting; specialized trade accounting programs like TradeLog for GreenTraderTax don’t have that capability. It’s best to use good investment-management business accounting software like FundCount.

In a Webinar on investment management accounting, we give a demonstration of FundCount software. We show different accounting challenges and solutions between incubator funds and managed accounts. Meet our CPAs on this Webinar and see how we can help you.

Some bigger trader clients at GreenTraderTax are also interested in our full-service “institutional” accounting solutions and services. Rather than handle accounting piecemeal, some larger business traders prefer to consolidate their accounting into one program.

FundCount handles the full general ledger, downloading transactions from banks and trades on securities, futures and forex from almost all online brokers. It handles tax treatment correctly on wash sales, Section 475 MTM and Section 988 or 1256(g) on forex. If you have a sizeable trading business, you deserve a more complete and consolidated accounting solution. It’s better for impressing the IRS in an exam, and saves on fees too. It helps make the larger trader scalable into an investment-management business.

Investor level accounting
Most hedge funds are set up as "pass-through entities," such as LLCs or Limited Partnerships, which are taxed as partnerships. This means taxes are not paid on the partnership (entity) level. Instead, all the partners carve up the overall income, expenses, trading gains and losses, and report those amounts on their respective partner level tax returns – e.g., their individual tax returns (on Schedule E).

Investor-level accounting can become very complex in hedge funds, and you probably need a specialized hedge-fund accounting solution together with expert accountants who know how to provide these (very specialized) services. Our accounting/tax hedge fund professionals often make special adjustments to accounting program results to generate the special numbers needed for tax preparation. Other "accounting only" providers miss the boat on these important tax adjustments, raising your overall fees and delaying your results.

What's so special about investor-level accounting? You need to account for when each investor joins or leaves your hedge fund, when they add to their investment or when they take a partial withdrawal. Consider that on any given day, the profit and loss of the hedge fund's trading accounts and expenses change, and on each given day the ownership percentages of all investors may change. Remember, a partnership is not taxed. Instead, the partnership entity level accounting must be allocated on a substantial economic basis to all the partners – and in effect this is done on a daily basis (wow, that makes it complicated). This can be a nightmare, and extremely costly to prepare unless you use the latest and best industry software and services. And we offer it all to you at a very reasonable price!

Smaller hedge funds prefer to maintain lower cost operations with little overhead
Many of our traders are accustomed to being one-person businesses, trading from their home-office. They are interested in trading for others to leverage their knowledge and make more money, but they don't want to change how they work. They don't want to have to hire internal accountants and secretaries, or rent extra office space or gain tons of paperwork. They don't want to spend their days with attorneys, accountants, administrators, consultants and business operation hassles. Our accounting, tax and compliance solutions take all the hassle out of entering the hedge fund business. Get excellent results, as demanded by your investors, at a very reasonable price.

We set up and generate all the accounting reports you need. We set up your hedge-fund accounting and tax solution based on your special needs. We then commence your periodic accounting, generating all the monthly and/or annual accounting reports (it doesn't have to be monthly). We generate the special tax numbers needed for your annual income tax returns. We handle all of the charges to your investors for the management fees and the performance allocations (or incentive fees). We prepare the statements to your investors. We send those statements to you via PDF files (or through secure Web access), so you can attach your monthly, quarterly or annual letter to investors to the statements and send them out to your investors. We handle everything for you, and your data is all set for the end-of year processing and filing of the tax returns for the fund and the management company.

Most of our clients use our hedge-fund accounting services on a monthly basis; others use it weekly, quarterly, annually or whenever they need to. Our work product includes NAV, performance records, brokerage statement reconciliation, advisory fee billing, performance allocation, investor changes, and other related reports generated from the software programs we use on your account. Note that all of your trading data must be imported regardless of how frequently you provide statements to your investors, so the difference between monthly and quarterly statements is not particularly significant.

Shop around. We guarantee you won't find another provider that can do everything we can under one roof, and that saves you money, gets you faster results, and improves the tax benefits and values for your investors.

Feel free to call and discuss your needs with us at info@greencompany.com or call us.