Hedge Fund Adviser

A Hedge Fund Adviser is the manager or adviser of a Hedge Fund that makes investment decisions for a hedge fund and has primary responsibility for investing and managing the assets of the fund. In most cases the adviser is not a person, but rather is an advisory firm or company. The firm that acts as the Hedge Fund Adviser can either manage all the assets directly or can hire one or more portfolio managers. These portfolio managers are usually allotted a certain amount to manage and usually have expertise or specialize in a certain management style or strategy.

United States based domestic hedge funds are typically set up as limited partnerships with each investor being a limited partner with no control, discretion or voting rights in the limited partnership. The term "Hedge Fund" also refers to what is known as an "Investment Company" which is regulated under the Investment Company Act of 1940. Offshore hedge funds are usually formed as corporations and each investor is a shareholder in that offshore corporation. As a shareholder each investor does have voting rights, but those voting rights are very limited. The Cayman Islands are the number one offshore jurisdiction in terms of the number of hedge funds domiciled there.

The term Hedge Fund Adviser refers to a firm or person that is more correctly known as an "Investment Adviser", and they are regulated under the Investment Advisers Act of 1940 (the "Advisers Act". The Advisers Act is very long, complicated and difficult to fully understand. Anyone considering becoming an Investment Adviser should seek experienced legal advice and carefully study the 1940 Act.

The Advisers Act was established by the United States Securities and Exchange Commission ("SEC") to provide guidelines and a regulatory framework for these investment vehicles. Some advisers are able to qualify for an exemption while others must register with the SEC. Even if the Adviser is exempt under the federal SEC regulations, the adviser might not qualify for an exemption under the state securities regulations where the adviser's office is located, and therefore, the adviser would have to register with that particular state.

Here's some more information on being a Hedge Fund Adviser.