hedge fund advertising

SEC Advises Investors To Read Hedge Fund Documents, Especially The Secret Ones Containing All The Fraud

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I think if I were running a small hedge fund far from prying eyes, every quarter I’d take a look at my performance and decide if I felt good about it, and then (1) if I did I’d take a nice chunk of the profits for myself and (2) if I didn’t then I’d drink until I felt better and GOTO (1). Also I’m sure that when I started I’d plan to take a percentage of whatever I earned over some benchmark, and day one that benchmark would be, like, some relevant index matching the style of my fund, but over time it’d creep down to “well 0% is a benchmark” and then, I mean, negative 10% is a benchmark too is it not? What is special about zero? And if investors asked “can you explain your fees?” I’d just yell “can you explain YOUR fees?” and wander off muttering to myself. Scott Ferguson, hire us!1

Chicago-area hedge-fund-ish thing GEI, its CEO Norman Goldstein, and his pleasingly named wife and chief compliance officer Laurie Gatherum started out nobly enough:

According to the September 2001 Agreement, GEI Management was entitled to a quarterly annual management fee of three percent of the net asset value of the Fund. GEI Management also received a quarterly performance fee – called an “incentive allocation.” This fee was subject to a high water mark and a benchmark. The Fund paid a performance fee to GEI Management only if the Fund produced net profits over the prior quarter and on a cumulative basis from the Fund’s inception in 2001. If these conditions were met, GEI Management received an incentive fee equal to 25 percent of the amount by which net profits exceeded the performance of the S&P Healthcare Index.

But what if GEI underperformed the S&P Healthcare Index? A careful reading suggests that then they wouldn’t get performance fees, which hardly seems fair, because underperformance is after all a kind of performance. This is solvable by amending the agreement, which GEI did (deleting the cumulative high water mark and the benchmark, i.e. giving them all profits above zero). Further careful reading of the agreement suggests that they needed 75% of outside investors to agree to this amendment, but that was solvable by ignoring it: Read more »

  • 27 Sep 2012 at 2:49 PM

First Hedge Fund Advertisement Objectivist, Maybe Illegal, Not On Dealbreaker

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Novelty currency dealer and possibly somewhat hedge-fund-esque entity CapitalistPig Asset Management have made some mistakes in their time – sending us unsolicited Nazi coins,1 quoting Ayn Rand in public, advertising their hedge fund in Crain’s Chicago Business, doing it before the SEC’s proposed rules allowing hedge fund advertising go into effect – but they were kind enough to send us a copy and a note saying “Proud to be the first hedge fund to advertise publicly since 1932.” So the least we can do is give them some additional free advertising here. The rest of you will have to pay. Also? Maybe wait until it’s legal. Read more »

New SEC Rules Practically Require Hedge Funds To Advertise On Dealbreaker

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The day when you can advertise your hedge fund on Dealbreaker creeps ever closer, so claim your spot now because they are going fast.* The SEC has shown some justifiable skepticism about implementing the JOBS Act, and at least SEC-ster thinks that it’s been dragging its feet on the hedge fund advertising rules, but still, it has to be said, when the SEC was told to let you advertise your hedge fund, they really let you advertise your hedge fund. Soon you will be able to:

  • say whatever you want about your hedge fund, and
  • not say whatever you don’t want to say about it, as long as
  • you take reasonable steps to actually sell it only to accredited investors.

Each of those things is a little surprising, no? First, there are no apparent restrictions on advertising – as DealBook says, “The commission was also mum on what sort of advertising would be allowed – can a hedge fund rent the Goodyear blimp, or will newspapers be the upper limit of public exposure?” You know who has blimp-sized plans? Of course you do: Read more »