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A number of friends/acquaintances want to give me money to manage on their behalf. Obviously if I were to do this under a personal account it would be illegal. So how hard/costly is starting an investment fund that can take money from other people? I would just want the cheapest, simplest legal structure possible and all funds would be from people I personally knew. I say "hedge fund" because I imagine that the legal structure they follow is most conducive to what I want to do but I am not married to any particular fund type/structure. For what it's worth, my investing style is macro-based, and I would want need access to FX and US equities/ETF markets. I know this kind of thing might not be practical at this point but I was just wondering if it was.

1

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Comments (66)

  • alexpasch's picture

    To do it properly, it's expensive ($30+K). To do it half-assed, it's really cheap ($3K).

    You would set up an LP and an LLC to serve as the GP. Then open a brokerage account, accept investments, and trade them. You could just set up one LLC and do everything under that, but that's viewed as shady, there's a reason everyone does an LP...

    The quality of your legal/accounting is what defines how much this costs. Also, unless you're going to have at least a few hundred K in AUM, don't bother as you won't have enough size to build a worthwhile track record.

    Consultant to a Fortune 50 Company

  • In reply to alexpasch
    Studiofan's picture

    alexpasch:
    To do it properly, it's expensive ($30+K). To do it half-assed, it's really cheap ($3K).

    You would set up an LP and an LLC to serve as the GP. Then open a brokerage account, accept investments, and trade them. You could just set up one LLC and do everything under that, but that's viewed as shady, there's a reason everyone does an LP...

    The quality of your legal/accounting is what defines how much this costs. Also, unless you're going to have at least a few hundred K in AUM, don't bother as you won't have enough size to build a worthwhile track record.


    +1 My dad did it in the 90s he said it cost him about 30k. Just out of curiosity how much money would your fund have?
  • Bi-Winning's picture

    What if your family/ friends gave you money as a "gift", and the returns you withdraw from the personal account is your way of thanking them?

    I win here, I win there...

  • In reply to Bi-Winning
    bfin's picture

    Bi-Winning:
    What if your family/ friends gave you money as a "gift", and the returns you withdraw from the personal account is your way of thanking them?

    So wishy washy....

    The answer to your question is 1) network 2) get involved 3) beef up your resume 4) repeat -happypantsmcgee

    WSO is not your personal search function.

  • Bi-Winning's picture

    I fail to see how anybody would find out if you traded $2000 on behalf of your relative?

    Just curious.

    I win here, I win there...

  • In reply to alexpasch
    newbie2banking's picture

    alexpasch:
    You would set up an LP and an LLC to serve as the GP. Then open a brokerage account, accept investments, and trade them. You could just set up one LLC and do everything under that, but that's viewed as shady, there's a reason everyone does an LP...

    Why LP and LLC required?

  • In reply to Bi-Winning
    kingtut's picture

    Bi-Winning:
    What if your family/ friends gave you money as a "gift", and the returns you withdraw from the personal account is your way of thanking them?

    It just doesn't work for a number of reasons. It's impractical because you would foot the tax bill on the realized gains in the personal account. Plus, your investors would also pay taxes on their gains. Technically you could "gift" the distributions back to your investors, if the $ amount was small, but in the end managing pooled assets in a PA would just be incredibly inefficient.

  • Frieds's picture

    Newbie,

    Alot of it is tax code related for the most part. Without diving into great detail, by using an LLC and an LP, the managing partners of a hedge fund's management company (the LLC) have no "individual" onus in terms of tax liability, particularly in the event of the fund's failure pursuant to non-illegal dealings. Basically, if the hedge fund goes belly up, provided it did nothing illegal, the managing partners are not deemed liable to pay for the failure out of pocket.

    Additionally, there are benefits to using this structure for trading purposes (getting an IDSA, for example, or using it to manage SPVs), as some types of instruments (again, the IDSA comes to mind and so do 144A securities) have strict requirements as to who can invest in them on both a Net Worth and Savviness level. While it is less so for Net Worth, by using an LP/LLC structure, your management company can qualify for a status called QIB - Qualified Institutional Buyer - indicating that you are financially sophisticated and understand the risks of investing beyond the regular person.

  • newbie2banking's picture

    Frieds - thanks for that. So the LP owns 100% of the LLC?

  • Frieds's picture

    No... the structure would be as follows... The LLC acts as the management company and serves as the General Partner for the Hedge Fund which is structured as a LP.

    I want to open a hedge fund. I hire an attorney and pay all the fees to open up Frieds Capital Management LLC. Their job is to be an investment manager/advisor for hire. Everyone employed by Frieds Capital Management is paid by FCM LLC. They are there solely to act as the fund management team and investment advisor. Now, I start raising capital for my first fund... lets call it the "FCM Lebowski Fund, LP". The sole purpose of the Lebowski Fund is to invest in bowling, booze, weed, nihilsts and rugs, especially rugs that tie the room together. I find capital to raise, but I need to use the LP structure in order ot make sure that 1) my investors are protected from harm baring loss of capital and 2) to keep unauthorized partners from transacting on behalf of the fund.

    So, I have my LP, and The Lebowski Fund hires FCM LLC to be the General Partner in the fund. FCM LLC signs the partnership agreement, which specifies all of the rules and investment guidelines of the fund. In return for signing up as the GP, gets to make all the decisions on which bowling alleys, booze companies, weed-related investments, nihilist shills and rugs to buy provided they are within the guidelines of the agreement signed between FCM and the Lebowski fund. Now that the GP is in place, I go out and start rasing funds. I get $25MM in investor capital. The investors sign on as Limited Partners and own a portion of the LP in relation to the amount of their investment. The GP also owns a small percentage of the fund, but has different liabilities than his investors do.

    So, in recap: LLC is Management company hired by LP to run the fund. LP is entity to invest through.

  • HFFBALLfan123's picture

    This should be on every thread that has to do with how a PEF/HF is structured and run. +1 imaginary SB.

  • AgreeWitMe's picture

    Why is it illegal to manage other peoples money under a personal trading account?

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  • Frieds's picture

    Libor,

    Great link... Clearly it's possible to do it on the cheap, but I'd rather do it right the first time than not do it right at all. It's so much easier that way.

    NYFinance, while I like that you brought up Covestor, it's a very price prohibitive measure. I don't know how much the OP is being given, but it's a far more expensive task using Covestor than it's worth, especially since we don't know how much is being invested.

    Agree, FGH, the reason why it is illegal is due to the tax implications associated with investing. Even if it is a long term time horizon, there are still implications which need to be resolved.

  • In reply to Frieds
    gatornuke's picture

    Frieds:
    No... the structure would be as follows... The LLC acts as the management company and serves as the General Partner for the Hedge Fund which is structured as a LP.

    I want to open a hedge fund. I hire an attorney and pay all the fees to open up Frieds Capital Management LLC. Their job is to be an investment manager/advisor for hire. Everyone employed by Frieds Capital Management is paid by FCM LLC. They are there solely to act as the fund management team and investment advisor. Now, I start raising capital for my first fund... lets call it the "FCM Lebowski Fund, LP". The sole purpose of the Lebowski Fund is to invest in bowling, booze, weed, nihilsts and rugs, especially rugs that tie the room together. I find capital to raise, but I need to use the LP structure in order ot make sure that 1) my investors are protected from harm baring loss of capital and 2) to keep unauthorized partners from transacting on behalf of the fund.

    So, I have my LP, and The Lebowski Fund hires FCM LLC to be the General Partner in the fund. FCM LLC signs the partnership agreement, which specifies all of the rules and investment guidelines of the fund. In return for signing up as the GP, gets to make all the decisions on which bowling alleys, booze companies, weed-related investments, nihilist shills and rugs to buy provided they are within the guidelines of the agreement signed between FCM and the Lebowski fund. Now that the GP is in place, I go out and start rasing funds. I get $25MM in investor capital. The investors sign on as Limited Partners and own a portion of the LP in relation to the amount of their investment. The GP also owns a small percentage of the fund, but has different liabilities than his investors do.

    So, in recap: LLC is Management company hired by LP to run the fund. LP is entity to invest through.

    Why does the fund itself have to be an LP? can it be an LLC instead, with the MP being another LLC? Why does it have to be an LLC managing an LP, rather than an LLC managing another LLC?

  • Frieds's picture

    Gator, I believe the term your looking for is GP, not MP. Now, while it is possible to use a multi-LLC structure, you have to consider the issues of taxation (especially with double taxation using an LLC as the fund itself) associated with both types of structure and protection from lawsuits. The benefits of using a Limited Partnership structure allow for a single taxation, and while the GP is exposed to unlimited liability in the event of a Lawsuit, he is protected by the fact that the GP will be an LLC, thus covering the individuals who are running the fun sufficiently enough. An LLC, while providing management companies from the liability exposure they wouldn't have as an LP, still has the double taxation associated with it because of the structure they are using.

  • gatornuke's picture

    I've also noticed that a number of reputable US banks are now offering back office products for hedge funds. Has anyone used these? If so, what do you like or not like about them? Is the cost reasonable?

  • miraifusionzt4's picture

    How much money would be reasonable to start this fund? Do we need millions of dollars like most people say or can we start with...let's say $30k?

  • idkmybffjill's picture

    One thing I've always wondered is what the technical difference is between a "hedge fund" where all partners have to be "accredited investors" vs. just a regular limited partnership with an LLC (the management company) as the general partner and clients as limited partners (this setup was mentioned several times above). Why does a "hedge fund" that uses this structure need accredited investors? Why can't you run a hedge fund without accredited investors? I hope this question makes sense.

  • In reply to idkmybffjill
    SirTradesaLot's picture

    idkmybffjill:
    One thing I've always wondered is what the technical difference is between a "hedge fund" where all partners have to be "accredited investors" vs. just a regular limited partnership with an LLC (the management company) as the general partner and clients as limited partners (this setup was mentioned several times above). Why does a "hedge fund" that uses this structure need accredited investors? Why can't you run a hedge fund without accredited investors? I hope this question makes sense.

    Private partnerships require you have accredited investors, not just hedge funds. All of this is in flux right now, but 3-c-1 funds require $1 million net worth or income requirements and allow you up to 99 investors (very few funds use this structure anymore); 3-c-7 funds require investors to have a $5 million liquid net worth and you can have up to 499 investors. I say this is in flux because the JOBS act will likely expand the number of investors allowed in these funds. There is no legal definition of "hedge fund".

    For other people considering what the OP was considering, I suggest you set up as an RIA and take discretion over separate accounts. The legal and accounting bills will kill you if you set up a fund with that small of an asset base.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • SirTradesaLot's picture

    Frieds -- LLCs are not subject to double taxation, C-corps are. I think some funds are set up as LLCs now. We decided against using an LLC structure for a fund primarily because most investors would be unaccustomed to it. I couldn't tell you any advantages or disadvantages of using an LP or LLC structure for a fund, I don't think it's a huge difference one way or the other.
    http://en.wikipedia.org/wiki/Limited_liability_com...

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • In reply to SirTradesaLot
    Frieds's picture

    SirTradesaLot:
    Frieds -- LLCs are not subject to double taxation, C-corps are. I think some funds are set up as LLCs now. We decided against using an LLC structure for a fund primarily because most investors would be unaccustomed to it. I couldn't tell you any advantages or disadvantages of using an LP or LLC structure for a fund, I don't think it's a huge difference one way or the other.
    http://en.wikipedia.org/wiki/Limited_liability_com...

    LLCs can elect how to be taxed - they can use the S Corp, C Corp, Sole Prop or Partnership taxation qualifications depending on whether or not they meet the criteria for those types of taxation. I'm assuming the highest tax burden here is all.

  • In reply to Frieds
    SirTradesaLot's picture

    Frieds:
    SirTradesaLot:
    Frieds -- LLCs are not subject to double taxation, C-corps are. I think some funds are set up as LLCs now. We decided against using an LLC structure for a fund primarily because most investors would be unaccustomed to it. I couldn't tell you any advantages or disadvantages of using an LP or LLC structure for a fund, I don't think it's a huge difference one way or the other.
    http://en.wikipedia.org/wiki/Limited_liability_com...

    LLCs can elect how to be taxed - they can use the S Corp, C Corp, Sole Prop or Partnership taxation qualifications depending on whether or not they meet the criteria for those types of taxation. I'm assuming the highest tax burden here is all.


    That's true...fair enough.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • In reply to SirTradesaLot
    idkmybffjill's picture

    SirTradesaLot:
    idkmybffjill:
    One thing I've always wondered is what the technical difference is between a "hedge fund" where all partners have to be "accredited investors" vs. just a regular limited partnership with an LLC (the management company) as the general partner and clients as limited partners (this setup was mentioned several times above). Why does a "hedge fund" that uses this structure need accredited investors? Why can't you run a hedge fund without accredited investors? I hope this question makes sense.

    Private partnerships require you have accredited investors, not just hedge funds. All of this is in flux right now, but 3-c-1 funds require $1 million net worth or income requirements and allow you up to 99 investors (very few funds use this structure anymore); 3-c-7 funds require investors to have a $5 million liquid net worth and you can have up to 499 investors. I say this is in flux because the JOBS act will likely expand the number of investors allowed in these funds. There is no legal definition of "hedge fund".

    For other people considering what the OP was considering, I suggest you set up as an RIA and take discretion over separate accounts. The legal and accounting bills will kill you if you set up a fund with that small of an asset base.

    Wait, so you're saying you can't set up ANY sort of partnership without having accredited investors? If a friend and I wanted to set up a partnership with me being the general partner and him being the limited partner for a lawn mowing business but we also wanted to buy/sell stocks, we can't do that because we aren't accredited investors?

    I feel like I'm missing something in my understanding....can you help fill the gap? lol

  • WhiteHat's picture

    Honest answer to starting a "small hedge fund" ... run under the table until you're big enough to not be able to hide it anymore. If you're sub seven figures, you'll be fine.

  • In reply to idkmybffjill
    SirTradesaLot's picture

    idkmybffjill:
    SirTradesaLot:
    idkmybffjill:
    One thing I've always wondered is what the technical difference is between a "hedge fund" where all partners have to be "accredited investors" vs. just a regular limited partnership with an LLC (the management company) as the general partner and clients as limited partners (this setup was mentioned several times above). Why does a "hedge fund" that uses this structure need accredited investors? Why can't you run a hedge fund without accredited investors? I hope this question makes sense.

    Private partnerships require you have accredited investors, not just hedge funds. All of this is in flux right now, but 3-c-1 funds require $1 million net worth or income requirements and allow you up to 99 investors (very few funds use this structure anymore); 3-c-7 funds require investors to have a $5 million liquid net worth and you can have up to 499 investors. I say this is in flux because the JOBS act will likely expand the number of investors allowed in these funds. There is no legal definition of "hedge fund".

    For other people considering what the OP was considering, I suggest you set up as an RIA and take discretion over separate accounts. The legal and accounting bills will kill you if you set up a fund with that small of an asset base.

    Wait, so you're saying you can't set up ANY sort of partnership without having accredited investors? If a friend and I wanted to set up a partnership with me being the general partner and him being the limited partner for a lawn mowing business but we also wanted to buy/sell stocks, we can't do that because we aren't accredited investors?

    I feel like I'm missing something in my understanding....can you help fill the gap? lol


    Any partnership where you take money (as far as I know, I'm not a lawyer). If you take discretion on a separate account (let's say it's custodied at Schwab or whatever), the clients do not need to be accredited investors, so you can buy securities for them.

    In your example, you could probably buy and sell stocks for your own account, but when you start managing money for others, you need to register as an investment adviser (series 63) in the states where your clients reside until you get to something like $100 million in AUM and then you register with the SEC.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • In reply to SirTradesaLot
    idkmybffjill's picture

    SirTradesaLot:
    idkmybffjill:
    SirTradesaLot:
    idkmybffjill:
    One thing I've always wondered is what the technical difference is between a "hedge fund" where all partners have to be "accredited investors" vs. just a regular limited partnership with an LLC (the management company) as the general partner and clients as limited partners (this setup was mentioned several times above). Why does a "hedge fund" that uses this structure need accredited investors? Why can't you run a hedge fund without accredited investors? I hope this question makes sense.

    Private partnerships require you have accredited investors, not just hedge funds. All of this is in flux right now, but 3-c-1 funds require $1 million net worth or income requirements and allow you up to 99 investors (very few funds use this structure anymore); 3-c-7 funds require investors to have a $5 million liquid net worth and you can have up to 499 investors. I say this is in flux because the JOBS act will likely expand the number of investors allowed in these funds. There is no legal definition of "hedge fund".

    For other people considering what the OP was considering, I suggest you set up as an RIA and take discretion over separate accounts. The legal and accounting bills will kill you if you set up a fund with that small of an asset base.

    Wait, so you're saying you can't set up ANY sort of partnership without having accredited investors? If a friend and I wanted to set up a partnership with me being the general partner and him being the limited partner for a lawn mowing business but we also wanted to buy/sell stocks, we can't do that because we aren't accredited investors?

    I feel like I'm missing something in my understanding....can you help fill the gap? lol


    Any partnership where you take money (as far as I know, I'm not a lawyer). If you take discretion on a separate account (let's say it's custodied at Schwab or whatever), the clients do not need to be accredited investors, so you can buy securities for them.

    In your example, you could probably buy and sell stocks for your own account, but when you start managing money for others, you need to register as an investment adviser (series 63) in the states where your clients reside until you get to something like $100 million in AUM and then you register with the SEC.

    Ah okay, Got it. I am a bit confused on something though....from googling this, it appears there is a series 63, 65, and 66 exams. Some places say take the 65. What is the difference between the three? Seems confusing.

  • wanttolearn's picture

    I don't think you need to get any series...I would be really shocked if people like Ackman or Einhorn took the Series 63...

  • In reply to idkmybffjill
    ValueWannabe's picture

    idkmybffjill:

    Ah okay, Got it. I am a bit confused on something though....from googling this, it appears there is a series 63, 65, and 66 exams. Some places say take the 65. What is the difference between the three? Seems confusing.

    ---.wallstreetoasis.---/forums/licensing-for-dummies (can't post the www /.com, it seems a bit ironic I can't link to the site..)
    "The Series 65 is the Registered Investment Advisor exam. This exam is required for money managers, investment advisors and anyone that manages funds on a non-commission basis."
    If you want to run a hedge fund, that's you. The 66 would count for both the 63 and 65, but you need to pass the series 7 before you take it; its a lot more work than the 65 if all you want to do is be an RIA.
  • In reply to wanttolearn
    idkmybffjill's picture

    wanttolearn:
    I don't think you need to get any series...I would be really shocked if people like Ackman or Einhorn took the Series 63...

    Can anyone confirm/deny that? Someone at the firm has to have it right? otherwise, how can they be operating as an investment manager?

    ValueWannabe:
    idkmybffjill:

    Ah okay, Got it. I am a bit confused on something though....from googling this, it appears there is a series 63, 65, and 66 exams. Some places say take the 65. What is the difference between the three? Seems confusing.

    ---.wallstreetoasis.---/forums/licensing-for-dummies (can't post the www /.com, it seems a bit ironic I can't link to the site..)
    "The Series 65 is the Registered Investment Advisor exam. This exam is required for money managers, investment advisors and anyone that manages funds on a non-commission basis."
    If you want to run a hedge fund, that's you. The 66 would count for both the 63 and 65, but you need to pass the series 7 before you take it; its a lot more work than the 65 if all you want to do is be an RIA.

    Thank you. So, to get the series 65, you don't need a series 7 beforehand, correct? Also, what is the purpose of the series 63?

  • In reply to idkmybffjill
    ValueWannabe's picture

    Fix the link I posted above - it has a lot more information about the 63/66 and pretty much every other financial licence. Yes though, you don't need to take the series 7 to take the 65.

    I also just remembered, you may not need to be an RIA to open an investment fund if you have 5 or less investors, depending on the state. I know its that way in New Jersey where I am. I can't find the actual NJ regulation, but http:/---.strictlybusinesslawblog.---/2011/09/11/state-investment-adviser-registration-requirements-for-private-fund-managers-part-6-the-northeast/ (www / com) lists the info for states in the north east, I'm sure you can find the regs for your state from there.

    It might also be possible to include non-accredited investors, but I'm not a securities lawyer (talk to one before you try it). Read 'Reg D' if you're curious http://www.sec.gov/answers/regd.htm

  • Busy Bernie Investment Club's picture

    Wow. I find the Internet so exciting. I was thinking today about forming a Limited Partnership of about 25 people here in our Independent Living facility for the sole purpose of being able to do some investing through a program with Stansberry & Associates. By doing this we can start out with $1,000 per person whereas none of us would want to invest $25,000 each. My thinking is that we could work together within the LP and if, say, in one year we see it would be nice to eah continue investing on our own we could just vacate the LP and let it run out or dissolve it. Your help will be greatly appreciated. Also, as Managing Partner would it be necessary for me to invest the thousand if I am going to be doing the work?

  • Prudentprophet's picture

    So if I set a LP and a LLC, Do my limited partners (aka investors) need to be accredited investors for the LLC to manage their money?

  • CrashCourse1's picture

    Is it true that you can set the actual fund up in the grand cayman islands and a management company LLC here in the states? If you do it this way (in theory) you could accept non accredited investors.

    We're running out of oil....sike!

  • spark's picture

    location??

    I love my bananas!

  • slim_ibd_shady's picture

    If you start a "fund" all by yourself, you trade/invest with your own money ONLY (no outside investors) under your personal individual account with a discount retail broker, do you still have to go through the proper structuring? If you do file for an LLC and LP, can you lower your capital gain tax by trading through a business account?

  • In reply to CrashCourse1
    slim_ibd_shady's picture

    CrashCourse1:

    Is it true that you can set the actual fund up in the grand cayman islands and a management company LLC here in the states? If you do it this way (in theory) you could accept non accredited investors.

    Kinda like what the Swiss and HK companies do to evade taxes?

    But if you are trading/investing in the US stock equity market, and as the owner of the LLC which is a US citizen, you are still bound to pay taxes like every other US citizen, correct?

  • In reply to slim_ibd_shady
    CrashCourse1's picture

    slim_ibd_shady:

    CrashCourse1:

    Is it true that you can set the actual fund up in the grand cayman islands and a management company LLC here in the states? If you do it this way (in theory) you could accept non accredited investors.

    Kinda like what the Swiss and HK companies do to evade taxes?

    But if you are trading/investing in the US stock equity market, and as the owner of the LLC which is a US citizen, you are still bound to pay taxes like every other US citizen, correct?

    Sure pay taxes, but can you trade an account that is set up off shore for the sole purpose of trading other peoples money and non accredited investors?

    We're running out of oil....sike!

  • Prudentprophet's picture

    What happens when the fund looses all the money? How does the LLC "protect" the partners aka investors in the LP? Don't the partners in the LP aka "limited" have limited liability or do I have this wrong? I still need to know if the LLC can invest funds from non-accredited investors. I mean if the partners aka investors in sign a contract letting the LLC manage their funds, it's fair game right?

  • In reply to Frieds
    Prudentprophet's picture

    Frieds:

    No... the structure would be as follows... The sole purpose of the Lebowski Fund is to invest in bowling, booze, weed, nihilsts and rugs, especially rugs that tie the room together. I find capital to raise, but I need to use the LP structure in order ot make sure that 1) my investors are protected from harm baring loss of capital and 2) to keep unauthorized partners from transacting on behalf of the fund.

    So what do you mean by 1)? If investors are protected from loss of capital, how does the LLC pay back the investor his money? I don't know what you mean by "harm baring loss of capital." Somebody has to pay.

  • Frieds's picture

    Prudent,

    I'm going to be straight up with you. If you don't know what the word Barring means (and yes, I'm aware of the typo in my spelling in the original post from over 2 years ago - yes, that's right, 2 years ago), then you shouldn't be in Finance. Barring, comes from using the word Bar as a transitive verb meaning to exclude, usually by exception. So, know that I've told you what Barring means, can you translate this sentence: "my investors are protected from harm baring loss of capital."

    I'll help you - "My investors" - the people who have entrusted their money with my hypothetical fund by investing in the LP - "are protected from" - don't have much to worry about being sued, having legal action taken against them, etc. - "harm" - anything that could go wrong from from management/operations/potential investment (see: vulture investing) that may result in legal actions being taken against the Fund's GP provided that the Fund's GP is not doing anything that is illegal - "barring" - Excluding - "the loss" - the not making and potential hemorrhaging of - "Capital" - any monies provided the investors into the LP.

    So, with the translation - The investors have a certain degree of legal protection afforded them as LPs and don't need to worry about any sort of bad juju (provided the fund is above board) except for potentially losing their shirt in the investment.

    Happy now? Or do you want me to continue answering your questions and breaking them down like this?

  • In reply to Frieds
    SlyGuy's picture

    Frieds:

    Prudent,

    I'm going to be straight up with you. If you don't know what the word Barring means (and yes, I'm aware of the typo in my spelling in the original post from over 2 years ago - yes, that's right, 2 years ago), then you shouldn't be in Finance. Barring, comes from using the word Bar as a transitive verb meaning to exclude, usually by exception. So, know that I've told you what Barring means, can you translate this sentence: "my investors are protected from harm baring loss of capital."

    I'll help you - "My investors" - the people who have entrusted their money with my hypothetical fund by investing in the LP - "are protected from" - don't have much to worry about being sued, having legal action taken against them, etc. - "harm" - anything that could go wrong from from management/operations/potential investment (see: vulture investing) that may result in legal actions being taken against the Fund's GP provided that the Fund's GP is not doing anything that is illegal - "barring" - Excluding - "the loss" - the not making and potential hemorrhaging of - "Capital" - any monies provided the investors into the LP.

    So, with the translation - The investors have a certain degree of legal protection afforded them as LPs and don't need to worry about any sort of bad juju (provided the fund is above board) except for potentially losing their shirt in the investment.

    Happy now? Or do you want me to continue answering your questions and breaking them down like this?

    Epic typo at the end of the first paragraph...detail is key with legal jargon

  • In reply to Prudentprophet
    Frieds's picture

    If that's really the answer you want with such a breakdown, my advice to you is keep a dictionary on hand and look shit up yourself. Nothing is better than being able to read the dictionary and look up words yourself. Try it some time. You might be surprised.

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