Funds of hedge funds take many different forms and structures and vary substantially with respect to type and complexity of investment strategy and underlying hedge funds. A number of different considerations need to be taken into account in determining the most appropriate structure for a FoHF.
Foremost among these will be the needs and preferences of the anticipated core investors. It cannot be overstated how important it is to identify at the structuring stage who the targeted investors will be in terms of their domicile, taxable status, base currency and appetite for potentially complex fund structures.
It will also be necessary to ensure that the structure deals with any adverse tax issues that might arise from the proposed investment strategy as well as balancing any particular tax planning that the FoHF may desire to put in place for its own benefit.
In most cases, portfolios of hedge funds are structured...