How to Start a Hedge Fund in Bermuda
Updated on Tuesday 07th November 2017
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An appealing location for hedge fund startup is Bermuda, which attracts numerous foreign investors. The local authorities have created a suitable investment legislation available for various types of investment vehicles. The legislation on hedge funds is given by the Companies Act 1981 and the Investment Funds Act 2006. Both Acts are applicable to investment vehicles set up as open-ended structures, while the latter mentioned Act (Investment Funds Act) does not apply to funds registered as closed-ended vehicles. In the last years, the legislation in the field was constantly modified to better accommodate the needs of specific types of funds and in this sense it is important to know that certain vehicles are not required to obtain an approval to operate on the local market.
Hedge funds in Bermuda
A hedge fund registered in Bermuda falls under the regulations applicable to mutual funds, which are registered as mutual companies, generally incorporated as companies limited by shares. The main characteristic of both hedge funds and mutual funds refers to the fact the investors pool a specific capital in order to increase their mutual return on investment.
Businessmen interested in how to start a fund in Bermuda registered as a hedge fund are required to follow the regulations applicable under the above mentioned Acts - the Companies Act and the Investment Funds Act.
Regulatory framework for hedge funds in Bermuda
The legislation on open-ended funds in Bermuda establishes certain categories of vehicles which fall under the regulations of the Bermuda Monetary Authority (BMA).
Investors interested in how to start an investment fund in Bermuda may set up one of the following:
• institutional funds;
• administrative funds;
• specified jurisdiction funds;
• standard funds.
Each type of fund sets up minimum criteria that are to be completed during the registration. For example, in the case of an institutional fund, each investor should participate with a capital of minimum $100,000. As a general rule, the legislation in this sense aims at increasing the participation on the local market of institutional and retail investors.
An investment fund in Bermuda has to be registered with the Registrar of Companies, where the investors will need to submit specific documentation, depending on the characteristics of the fund chosen for incorporation.
Further on, the investors will need to apply for authorization on the local market, which will be granted by the BMA. Our partners can offer further assistance on this subject and foreign investors are invited to contact our team of affiliates in Bermuda for consultancy services, as well as on information on the authorization exemptions available for certain vehicles.