Proskauer's Hedge Start: Key Hedge Fund Terms

Hedge Start: Key Hedge Fund Terms

One of the first decisions faced by a new hedge fund manager is what terms to offer. The key terms to consider are liquidity terms (the terms of permitted redemptions or withdrawals from the fund) and the compensation payable to the hedge fund manager.

Liquidity Terms

The terms most frequently offered by hedge funds permit subscriptions on a monthly basis and redemptions on a quarterly basis, typically on 30 to 90 days' prior notice to the fund manager, with the redemption proceeds payable within 30 days. But there are many different variations of redemption terms that can and should be considered by a new hedge fund manager, especially if the underlying investments held by the hedge fund cannot be easily or promptly liquidated. Some key variations to consider include: