HEDGE FUNDS
FUNDS TYPES & OFFERINGS: FOREX (CURRENCY) FUNDS



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Forex Hedge Fund Management

The number of hedge funds and hedge fund investors has soared. Forex traders looking to start a fund need to understand the rules and regulations before they quit their day jobs.

It is understandable why, from trader's perspective, hedge funds have become so popular in recent years. A talented hedge-fund manager can accrue substantial income. While starting a hedge fund obviously isn't for the novice Forex trader, it's not as complicated as it seems.

Let's assume a trader has a modest $3 million under management, and his Forex hedge fund has a 1-percent management fee and a 20-percent performance allocation fee (i.e., a share of the profits). Assume the fund was started on the first day of the year and returned 15 percent.

In this case, the trader would have gross income of $120,000, consisting of a $30,000 management fee ($3 million * 1% = $30,000) and a $90,000 performance allocation ($3 million * 15% return = $450,000 * 20% = $90,000). Using all the same assumptions, a hedge fund manager with $10 million under management would make $400,000.

Also, because prospective investors like to see fund managers' risk their personal capital, assume the fund manager has a significant portion of his own money invested in the fund. Because there are no fees assessed (it would just increase taxes), the trader earns an additional 30 percent on his own investment in the fund.

However, before a trader can potentially enjoy these rewards, he or she must structure a proper business. The good news is Forex traders are now positioned to launch a Forex fund quickly with minimal regulatory oversight...

This article originally appeared in the March 2005 issue of Currency Trader magazine. Reprinted with Permission. Contributing magazine writer: Robert A Green

GreenTrader is not a law firm, we work on your hedge fund development (business, registration, tax and accounting) and utilize outside independent attorneys (as your liaison).

If you have any questions or would like to get started, please email hedgefunds@greencompany.com and/or call us.