Forex or currency funds have enjoyed a huge surge in popularity. While starting and managing a forex fund isn't for the inexperienced forex trader, it's not as tough or complicated as it may seem. These funds woo investors who want to participate in the forex markets but who know that they do not have the time or expertise to trade their own accounts.
How Does a Forex Fund Work? Although the name still sounds exotic to some, a forex fund in the US is typically a private investment partnership set up so as to allow it to remain exempt from the registration requirements federal and state law imposes on publicly-traded funds. When set up outside the US, a forex fund is usually set up as an exempt limited company in a low or zero tax country, such as the Cayman Islands. However, a fund manager may have a website to advertise its advisory business in most cases and the fund manager may offer access to the forex fund's daily performance through a password-protected website.
Many countries have rules similar to those of the US in this regard. Most forex funds are quite small. Of course, the fund manager also receives the profits on the money he himself has invested in the fund. Prospective investors in the fund like to see that fund manager has invested his own capital in the fund.
Who Would My Investors Be? A forex fund investor needs to be a sophisticated investor who understands the risks associated with the fund. Since the media has generally informed the public of the potential advantages as well as the risks of forex funds, and since forex funds cannot advertise, there are many investors who would be interested in forex funds if they had the opportunity. A trader may find that in addition to family and close friends, many colleagues and casual acquaintances may be potential investors.
If you are interested in getting investors for your fund, your selling efforts must be personally directed toward investors who are known to you. Advertising and any other non-personal communications are prohibited. For the forex trader who wants to trade for his family and friends, this obviously is no problem at all.
The forex fund is an ideal vehicle to pool the resources of a small group of investors. Starting a forex fund means hiring a lawyer with the proper expertise to prepare all of the required documents and provide you with tax and regulatory advice. The forex trader starting the fund will have to work closely with his lawyer to prepare of some of the documents, especially the private placement memorandum PPM , which is the description of the fund provided to investors.
In some cases, the cost is even less. For a trader to enjoy such success, he must set up the correct infrastructure. The desire to pool assets in a way that is proper, both from a business and a legal standpoint, has led many forex traders to start their own forex funds.
For a successful forex trader, a forex fund is an efficient, legal, and professional way to trade your own money along with the money of those who want to benefit from your expertise. For additional reading, click here to read the article 'Forex Hedge Fund Management'. Forex Trader to Forex Fund Manager: Email this Article to a friend. I came across this article in Eurekahedge's monthly newsletter which you may be interested in: The manager interview shown on this page is for viewing by accredited investors only.
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