United States

Liquid alternative funds

Considerations for hedge fund managers


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In recent years, a new type of fund has emerged in the financial products landscape. These funds, called liquid alternatives (or liquid alts), have appeared on the market at a rampant pace. Liquid alts are regulated investment companies or closed-end funds that employ nontraditional strategies similar to those of a hedge fund. Their availability to retail investors has increased their attractiveness, but this comes with increased regulatory considerations.

This white paper explores important tax considerations for hedge fund managers in this space, ranging from the legal structure to tax qualification requirements. Since certain types of investments that are common in hedge funds can cause qualification issues within a regulated investment company structure, the white paper also addresses associated investment considerations for hedge fund managers.