Registered funds of hedge funds have several advantages over unregistered funds of hedge funds for eligible investors who wish to gain access to the asset class.
Due to the lack of registration, unregistered funds of hedge funds avoid the costs of registering and have fewer constraints on certain investment decisions such as use of leverage and investing in certain hedge fund organizational structures.
However, registered funds of hedge funds, by comparison, are permitted to advertise and undertake broader general solicitation and are not limited as to the number of investors. This often benefits the investor in terms of a lower investment minimum.
Additionally, eligible investors may benefit from enhanced disclosure when investing in a registered product.
Footnote 1Registration does not imply that the SEC or any other regulatory agency has approved or disapproved the securities or passed upon the accuracy or adequacy of the offering materials or the merits of an investment in the securities. Any representation to the contrary is a criminal offense. It should also be noted that the underlying managers in a registered fund of hedge funds are not necessarily registered under the IC Act of 1940. See the Risks section for important information regarding risks of a lack of regulatory oversight of hedge funds.