Understanding Hedge Fund Fees: Implications for Hedge Fund Managers
SOME HISTORY
Why are offshore hedge funds generally set up as
corporations rather than partnerships? The offshore
arm of the hedge fund industry dates from the late
1960's. Then, the jurisdiction of choice was the
Netherlands Antilles, which had a favorable tax treaty
with the U.S. The treaty benefits applied only if the fund
was set up as a corporation. Through the late 1980's
and the 1990's, when the benefits of the tax treaty no
longer existed, hedge funds were also set up in the
British Virgin Islands, Bermuda, Cayman Islands and
elsewhere. Following the model of the 1960's, they
continued to be set up as corporations as the European
investor was most comfortable with this structure. But
now, we have partnerships! Hong Kong, Singapore,
China, Japan, Cayman, Luxembourg, Ireland, and so on.
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K&L GATES
EA
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