Is this a hedge fund?

[billybob99]

Hi there,

Sorry if this is in the wrong section, was debating if it should be under accounts and finance or legal.

I have been doing research for a few weeks now, it seems to open a hedge fund in the UK is a real pain in the bum and nobody really does it, they are usually registered in the cayman islands or somewhere else. I read, "theoretically, a fund registered in London would have to register with the Financial Services Authority, but this has never actually happened. An FSA spokeswoman says: "Nobody ever registers hedge funds in the UK. If somebody did, we'd be scratching our heads over how to deal with it. We'd have to devise something."

I am using hedge fund as the underlying concept here. I wanted to know is it possible to set up a Ltd company in the UK whereby investors can invest their money into this company, and this company then used that money to invest in up and coming new companies (taking a certain % of equity in each company).

Sorry for babbling.

 

[LowPrices.uk]

Why do you ask? I'm sure there are a few company structures you could choose, essentially you are suggesting setting up an incubator fund, of which there are many in the UK. There is now also crowdsourcing.

 

[billybob99]

I ask because this is something I am looking to setup, but I was not sure of the legality of it and if it had to go through FSA etc. You are right it is basically an incubator fund, which as you mentioned I have seen several. I was confused if this would be classed as a "hedge fund" as its essentially managing other peoples money.

 

[LowPrices.uk]

Incubator funds are very different to hedge funds. I would just look at some of the many incubator funds that already exist and see what company structure they use.
The venture capital space might also be of interest to you:

http://www.webref.eu/venture-capital-companies.php

Rgds

 

[billybob99]

Thanks, a few I have seen are simply UK Ltd companies. But I will check it out thanks for the info and link.

 

[billybob99]

It seems with an incubator hedge fund you don't allow other investors into the fund it's just your money that you're trading with. I would actually be using investors capital.

 

[UK Contractor Accountant]

I am sure any uk company which is flogging investments to the general public would be subject to some sort of regulation by the FCA.

 

[billybob99]

It's not going to be public per say, as in advertised to the public, the investors that would be investing are high net worth individuals that are already on board but I just wanted to make sure it is set up properly and legally.

 

[Nick James Lomax]

I wanted to know is it possible to set up a Ltd company in the UK whereby iinvestors can invest their money into this company

Hi Billy - short answer here really is a YES although will vary depending on the company structure and all sorts...

It seems with an incubator hedge fund you don't allow other investors into the fund it's just your money that you're trading with. I would actually be using investors capital.

You'll need to be very careful with your terminology because if you are "trading" with clients funds then you'll need to be regulated.

It can of course depend on the commodity or asset that you are trading on behalf of clients so always make sure you have your bases covered - a lot is down to administration.

Will the investor have ownership of an asset or will this be via a company etc?

Either way if using clients capital to invest in projects/opportunities then you'll most likely need assistance from a legal/compliance specialist.

I am sure any uk company which is flogging investments to the general public would be subject to some sort of regulation by the FCA.

Depends on the the product and if the company is deemed to be giving investment advice or not...

It's all about investor classification, financial promotions and marketing, also throwing into the mix to as whether or not the company is either

a) Giving "Investment Advice"
b) Simply an introductory agent

It's a fine line with so many unregulated investments such as property, alternative asset classes and of course the boom in P2P/Crowdfunding a lot now is down to the experience of individual investor.

the investors that would be investing are high net worth

Classification wise - if you're targeting HNW - you'll also be able to introduce whatever you are introducing or packaging to SCSI & CSI...

but I just wanted to make sure it is set up properly and legally.

This is vital - If you are taking funds from clients and then investing these funds in a selection of vehicles you would most definitely be deemed as a regulated activity so you're best bet is to get a Regulated specialist on board...

I ask because this is something I am looking to setup, but I was not sure of the legality of it and if it had to go through FSA etc.

If in doubt, always run things past someone at the FCA, depending on your budget then there are a few consultants that will be able to assist.

There are a few other things to consider here as well

• Origin of funds, which jurisdiction and AML?
• What you (or the clients) are investing in
• How are you sourcing the Products/opportunities for the investors?
• Are you acting as an agent or introducing broker for products?
• Are you looking at a UCIS?

high net worth individuals that are already on board

If you have investors that are already on board - what are they onboard with, have they committed funds and what are they expecting or looking to invest in?

 

[Mark T Jones]

From your posts, my understanding is that you are setting up a crowd-funding or peer to peer investment company? Not unlike crowdcube, for example?

This area currently operates under a voluntary code, but is attracting much attention from the FCA. It really relies on the concept of 'sophisticated investors'

 

[JT_Biz]

You need to have significant experience in the finance industry and you need to be authorised by the FCA. In addition you need the right kind of qualifications (CISI, ICAEW, ACA, CIMA, ACCA, CFA etc).

Don't start with the regulators, they wont advise you (this is important to note at this stage). You need appropriate, suitable and reliable advice. A friendly accountant and law firm can give you some pointers, but if you don't have experience in the industry and I don't mean you invested a few thousand here and there, that doesn't count then its not going to happen with your current vision.

You need to find lawyers and accountants with the right experience, knowledge and ability (and reputation) to be able to advise you on what you are attempting to do (check Law Society and ICAEW). Don't think low budget, it doesn't work like that.

The bottom line is if you have not worked in the industry for any length of time and you aren't qualified then your chances of success are very low.

 

[billybob99]

Thanks for all the answers everyone, I have began the process of delving a little deeper!