Erisa Rules For Hedge Funds In Phoenix
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The Investment Advisers Act requires hedge fund managers with over $100 million in assets under management to register with the SEC as investment advisers. Registered advisers are subject to periodic examinations and must maintain detailed records of their activities.
As a result, most hedge fund managers seek to keep the level of investments by Benefit Plan Investors in their funds below the ERISA 25% threshold at all times so as to avoid such obligations.
ERISA restricts certain actions related to how benefit plans are designed and administered. For example, it limits the types of investments that retirement plans can make, imposes fiduciary duties on plan administrators, and mandates specific reporting and disclosure requirements.
In general, ERISA does not cover plans established or maintained by governmental entities, churches for their employees, or plans which are maintained solely to comply with applicable workers compensation, unemployment or disability laws.
ERISA prohibits cross trades, the exchange of assets between two accounts without going through a public market. There have been numerous exemption requests motivated by a desire to reduce transaction costs. Mutual funds are permitted to cross trade under Rule 17a-7.
You generally need to be an accredited investor to qualify for investing in hedge funds, which the sec defines as having a net worth of >$1M excluding your residence. And an annual income of $200k or greater.
Investing in hedge funds requires a minimum of Rs. 1 crore, making them mostly inaccessible to the general public. These funds carry high risk and are subject to significant taxes. Hedge fund strategies suit affluent investors with surplus funds who can handle additional risk for the potential of higher returns.
ERISA and the “plan assets” regulation issued thereunder generally treat the assets of a hedge fund as “plan assets” subject to the fiduciary responsibility and prohibited transaction provisions of ERISA and Section 4975 of the Code if, immediately after the most recent acquisition, disposition, transfer or redemption ...
Because they are not as regulated as mutual funds or traditional financial advisors, hedge funds are only accessible to sophisticated investors. These so-called accredited investors are high net worth individuals or organizations and are presumed to understand the unique risks associated with hedge funds.
Investing in hedge funds requires a minimum of Rs. 1 crore, making them mostly inaccessible to the general public. These funds carry high risk and are subject to significant taxes. Hedge fund strategies suit affluent investors with surplus funds who can handle additional risk for the potential of higher returns.
