What is a hedge fund_

There are even hedge funds that put money to work in specialized asset classes such as patents and music rights. Purpose of money laundering So if you haven’t already guessed, hedge funds can specialize in just about anything. Is money laundering illegal Where Did Hedge Funds Get Their Name?

Many generations ago, the original hedge funds were structured to hold stocks both long and short (positions were “hedged”) so the investors made money regardless of whether the market increased or decreased.

Money laundering in the uk That was the objective, anyway. Miami money laundering The name stuck and expanded to include all sorts of pooled capital arrangements. Money laundering certification How Are Hedge Fund Managers Paid?

The hedge fund managers are compensated based upon whatever terms or arrangements are found in the operating agreement. Money laundering texas Some hedge fund managers receive the standard “2 and 20”, which means 2% of net assets per year plus 20% of profits above a predetermined hurdle rate. Federal money laundering Other hedge fund managers are paid on a pure profit arrangement. Insurance money laundering Going back to the now famous Buffett partnerships, Warren Buffett took between 25% and 50% of profits but also agreed to cover partner losses to varying degrees, exposing himself to far more risk than many professionals would be comfortable doing.

Nearly all hedge funds feature a “high water mark”, meaning if the fund declines, the manager must make up the losses before he or she can earn additional pay. Laundering of money Who Can Invest In Hedge Funds?

Technically, most people are probably eligible to invest in hedge funds. What does placement mean in money laundering Practically, only “accredited investors” and/or “sophisticated investors” will be able to do so as a result of government regulation that makes it highly unlikely a hedge fund manager is going to admit you to the partnership or firm unless you qualify. Anti money laundering identification requirements Even if the hedge fund manager were inclined to make an exception, he or she can really only admit 35 non-accredited investors so they will want to keep those spots open for close friends and family members.

• Personal income of $200,000 or more per annum by himself or herself. What do you understand by money laundering If married, combined income must be $300,000 or more per annum. Money laundering uk sentences This income must have been earned for at least two consecutive years and the investor must have reason to believe he or she will maintain this level of income in the future.

• An employee benefit plan or trust fund with a net worth of $5,000,000 or more not specifically formed for the purposes of making the investment

• What are sophisticated investors? Sophisticated investors have both the knowledge and experience necessary to evaluate and understand the risks and merits of an investment.

To better familiarize you with the subject, let’s take an extreme example. Anti money laundering definition Imagine that I setup a company called “Global Umbrella Investments, LLC” as a Delaware LLC. Money laundering detection The operating agreement, which is the legal document that says how the company is managed, states that I will receive 25% of any profits over 3% per year and that I can invest in anything – stocks, bonds, mutual funds, real estate, startups, art, rare stamps, collectibles, gold, wine; doesn’t matter.

Along comes a single investor who invests $100 million into my hedge fund. Layering definition money laundering He writes the company a check, I put it into our brokerage account, and deploy the capital according to any guidelines that were spelled out in the operating agreement. Report money laundering uk Perhaps I use the money to buy up local restaurants. What is meant by money laundering Maybe I start a new company. Ofac money laundering Either way, the point is that every day when I wake up and go to the office, my purpose is to put my investor’s cash to work at the highest rate possible ( adjusted for risk, of course), because the more I make him, the more I get to take home.

For argument’s sake, image that I made an unbelievable investment the first year, doubling the company’s assets from $100 million to $200 million. Money laundering layering means Now, according to the company’s operating agreement, the first 3% belongs to the investor with anything above that being split 25% to me and 75% to my investor. Money laundering process In this case, the $100 million gain would be reduced by $3 million for that hurdle rate. Belize money laundering The remaining $97 million is split 25% to me and 75% to my investor.

The net result is that I walk away with $24.25 million in compensation. Money laundering refers to My investor gets the $3 million hurdle earned and $72.75 million from the split to which he is entitled above that hurdle, bringing his cut to a grand total of $75.75 million.