How is a Hedge Fund Set Up?

Hedge funds tend to consist of a management company or partnership that directs the investment of the fund and a separate legal entity, frequently in a jurisdiction such as the Cayman Islands which holds the actual assets. There may also be Feeder Funds which are more tax efficient for investors when placing their assets before these assets are moved to the Master Fund. In order to run such a fund, hedge funds tend to be large users of other services from Prime Brokers, Administrators, accountants and others. Legal counsel and compliance are especially important given the potential for hedge funds to be regulated in multiple jurisdictions.