The majority of hedge funds operating worldwide are each established in the USA as a partnership (joint partnership) in which shareholders or limited liability partners can participate. The investors thus assume the role of limited partners. As a result, the partnership itself is tax-exempt. Taxation shifts to the level of the participants (pass-through entity: any legal entity that collects and distributes income and losses to its owners, who wish to protect themselves from personal liability for obligations of the entity). – Hedge funds in offshore financial centers – mainly Bahamas, British Virgin Islands, Cayman Islands, Barbados, Bermuda, Channell Islands – are regularly set up in the same way to ensure tax exemption of the company. – All investment decisions, however, are not made by the company itself, but are regularly made and executed by management (investment advisors) commissioned for this purpose. – See brokerage, performance fee, leverage, high watermark method, non-bank, no-load fund.
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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