Many co-investments, direct investments and managed accounts can be considered shadow capital. Instead of allocating to a blind pool, shadow capital investors negotiate bespoke terms and lower fees – and they can have a say in what investments a fund makes.

In the dynamic and ever-changing hedge fund industry, it is important for hedge fund managers to be aware of the current trends regarding fund structures and terms to give themselves the best opportunity to effectively market and raise capital from investors. In this article, we highlight some recent trends, as well as terms managers are negotiating with investors to help make fund launches successful.

The first question most managers ask us about the common reporting standard (CRS) at Citco’s Central FATCA Team is: “Is this just more FATCA?” The answer in a nutshell is… well, yes. But, as the older moniker GATCA implied, this is FATCA on a global scale, with almost 100 countries pledged to participate and agreeing to share tax information on account holders within their jurisdiction with other participating countries. We refer to these regulations – US FATCA, UK CDOT and CRS – collectively as automatic exchange of information (AEOI) regimes.

In August 2015, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a notice of proposed rulemaking (the “proposed rule”) which, if enacted, will require all SEC-registered investment advisers to establish anti-money laundering (AML) programs and report suspicious activity to FinCEN.