For those of you who are not familiar with the term, a hedge fund is 'an offshore investment fund, typically formed as a private limited partnership, that engages in speculation using credit or borrowed capital.'±
A Hedge Fund is designed to protect investments from market uncertainty, spreading investments into many different pools as a way to manage risk.
Though offshore hedge funds carry more risk than the regular market, through proper risk management and financial portfolio construction, it can have the same risk as many domestic funds
The British Virgin (BVI) Islands represent an attractive offshore jurisdiction for establishing a financial company due to its lax regulatory structure and cheap formation costs.
A BVI Hedge Fund gives one an exposure to international markets in a low tax environment and can be formed as a Company, Unit Trust or Partnership taking on all the benefits afforded a global offshore company. The structure is extremely flexible making it an efficient jurisdiction to go offshore.
A BVI closed-end fund is different from an open-ended fund as investment assets are redeemable by the fund manager or through the terms of agreement rather than redeemable on demand which is mostly the case within a regular Mutual Fund.
As a result there can only be a fixed number of investment units for sale. Consequently, closed-end funds are not subject to regular licencing and supervisory requirements that a normal Hedge Fund would be under. The advantage is lower entry costs compared to the typical mutual fund.
The BVI Fund benefits a recent regulatory change that gives private equity and venture capital managers a ‘lighter touch’ regime so that it can compete in the modern offshore financial services industry.
For more information on BVI