Tim Seymour is co-founder and managing partner of Red Star Asset Management, as well as Chief Operating Officer of the $116 million Red Star Double Alpha Fund. » View all entries
Richard Heller Richard Heller is a partner at the New York City law firm of Thompson Hine LLP. His experience is in the formation of private offerings for hedge funds as well as the formation of registered broker-dealers and RIAs.
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Cameron Hight, CFA, is an investment industry veteran with experience from both buy and sell-side firms, including CIBC, DLJ, Lehman Brothers and Afton Capital. He is currently the Founder and President of Alpha Theory™, a Portfolio Management Platform designed to give fundamental money managers the ability to create their own repeatable discipline to organize the complex process of portfolio management.
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I was cruising through our archives today and found this valuable article on hedge fund trademarks, which is worth a read if you haven’t thought about trademarking your hedge fund.
Trademarks are invaluable assets. They are the primary means through which most companies identify themselves to the public, and the primary means through which the public identifies and distinguishes one company from another. Yet many hedge fund managers do not register their trademarks with either the United States Patent and Trademark Office or the trademark offices of other countries in which they conduct business. By failing to register their trademark rights, hedge fund managers are potentially losing out on some important benefits they would otherwise enjoy and in some cases may even be risking the loss of their trademark rights. Since trademark applications can be filed both before and after a hedge fund has launched, even managers of active funds who have not yet registered their trademarks should give serious consideration to filing a trademark application. Below we briefly discuss what a hedge fund trademark is and the factors fund managers should consider in deciding whether or not to register their hedge fund trademarks.
What is a trademark and why are trademarks important to hedge fund managers?
A trademark is generally a word, phrase, symbol or design, or a combination of words, phrases, symbols or designs, that identifies the source of a product or service and distinguishes the source of that product or service from the source of other products or services. In the case of hedge funds, the fund’s trademark is frequently the same as or comprises a portion of the fund’s name. For example, in the case of a hedge fund where the investment manager is ABC Capital Management, LLC, the general partner is ABC Capital, LLC, and the fund is ABC Partners, LP, the mark ABC may be considered the hedge fund’s trademark, since it is by this portion of the fund’s name that the fund is recognized by the public.
Establishing valid trademark rights is important because owning valid trademark rights entitles the trademark owner to prevent third parties from using the same or a confusingly similar mark for the same or related goods or services to those of the trademark owner. This can prevent the public from being confused between two or more funds with similar names or marks. Although hedge funds are generally precluded from advertising, and relationships with investors are developed primarily through personal connections, confusion can and frequently does arise through external sources. As one court noted in finding trademark infringement where both parties were in the investment business: “High-level investment business is commonly conducted based on trust and personal relationships among individuals. If any investor reads about a [Defendant] investment … and mistakes that transaction for a [Plaintiff] investment of which it was not aware, it may well feel ‘cut out’ of a potential lucrative deal. … [I]ts business relations with [Plaintiff] could be soured.” Morningside Group Ltd. v. Morningside Capital Group, L.L.C., 182 F.3d 133, 140 (2d Cir. 1999).
Trademark registration can provide fund managers with valuable benefits. If you have any questions about trademark registration, please contact Beth Alter at Seward & Kissel’s Intellectual Property Group at (212) 574-1427 or alter@sewkis.com.
Bart Mellon at the Hedge Fund Law Blog has been busy blogging about Insider trading.
His first article titled “Insider Trading Overview” gives a great summary of what everyone should know about Insider Trading.
In light of the recent focus on insider trading, we are publishing the SEC’s discussion on Insider Trading. The information below contains a broad overview of some of the important aspects which hedge fund managers should understand about the insider trading prohibitions.
In another article Bart goes on to list issues which are increasingly relevant after the Galleon hedge fund failure.
There is a lot of speculation regarding the proposals which are currently on the floor of Congress which would determine the future of hedge fund regulations.
SEC Chair, Mary Schapiro, recently pointed out that Reporting and open Books & Records were high on the regulatory priority list:
So we really need reporting. We need registration. We need the ability to examining their books and records, and understand how they’re conducting business. (source)
Many in house hedge fund marketers do not believe they have to be licensed. They are right, if they get paid a salary to raise assets. If however, they get compensated based upon the amount of assets raised (performance), then they too must be FINRA licensed. They are essentially selling a security, an LP investment. In addition, all hedge fund marketers including in house and third party must be licensed in the state in which the investor they are soliciting investors.
The blog entry goes on to discuss the more tricky aspects of finding the correct marketers and ensuring that they are properly supervised and follow all the FINRA regulations regarding marketing hedge funds.
See if you can pass the “How much do you know about hedge fund marketing” test
If you’ve talked to a hedge fund manager for any amount of time, the topic of prime brokers will come up. One of the fundamental issues when setting up a hedge fund is finding a prime broker who will fit your balance of price vs. services rendered.
In the world of prime brokerage, there are the Goldman’s, the Morgan Stanley’s, and the JP Morgan’s, and then there is everyone else. The big boys of the prime brokerage world offer the best of trading platforms and great customer service, if your hedge fund is big enough for them to turn a profit on your account. Hedge funds under $100 million in assets might have a hard time getting Goldman Sachs on the phone. Even if that fund was able to get into the Goldman customer book, what kind of servicing do you think they could expect?
Alex goes on to answer the following important questions regarding your prime brokerage relationship and specifically when is the right time for your hedge fund to use a mini prime.
Why Use a Mini Prime
Benefits of Mini Prime Brokers
How to Choose a Mini Prime Broker
The conclusion which is drawn is that if you choose to use a mini prime you should either get better pricing or better services. If you don’t get one or preferably both, then keep shopping!
Andrew Schneider has been appointed as Director of the HFA Southeast Chapter. In this role he will lead regional efforts to foster growth and development of the hedge fund community throughout the Southeastern U.S.
Andrew is founder and co-principal of HedgeCo Networks, a hedge fund research and services firm. At HedgeCo, he provides consulting services to new and existing hedge funds, and oversees a database of over 6,500 hedge funds, including a community of over 35,000 members. Andrew is often sought by major media outlets and industry publications for his expertise on the hedge fund industry. He appears regularly on CNBC and has been quoted in over 200 financial publications.
HFA Member programs are driven by Regional Chapters in Northeast, Midwest and now the Southeast. The Director of the HFA Northeast Chapter is Michael Scanlon, and the Director of the HFA Midwest Chapter is John Peterson.
HFA is also pleased to announce the addition of Anh Huynh as Manager of HFA Government Relations. Anh is based in Washington D.C., and will help expand efforts to educate the public, media and lawmakers to dispel myths and advocate for all industry participants.
There are a lot of factors that come into play when trying to determine what group of websites get the most traffic. Many people have used the “Reach” statistic from Alexa.com to determine how much traffic that a website receives.
The inherent problem with Alexa is that it estimates the traffic based on the number of people who use the Alexa Toolbar (which is flagged as spyware by most antivirus programs). These estimations give a general idea of how much traffic a site gets, but because of the flawed methodology, Alexa can easily be gamed to show more traffic than a site actually gets. For more information about the inherently problems with Alexa rankings read this creative blog entry titled “20 Quick Ways to Increase Your Alexa Rank“.
Quantcast: A Quantitative Alternative
Quantcast is an alternative which uses far more efficient technology to get direct information about the site traffic as well as the user base of the site. This traffic is not estimated, but gathered directly from your site. This technology makes Quantcast a far better technology to use for comparing site traffic. For a detailed look at how Quantcast works read this article from their website.
Quantcast.com Top 5 Hedge Fund Websites
Based on data from Quantcast, I’ve created the list of the top 5 hedge fund database websites – the lower the number the more traffic.
There are many types of traffic which quantcast will not catch, but it is by far the most accurate of all third-party online website traffic tracking services.
Compete.com tells a different story & puts HedgeCo.Net as #1
Showing that not all third party web site traffic trackers are created equal, I ran the top 3 contesters HedgeFund.net, HedgeCo.net and BarclayHedge through compete.com yet another third party traffic tracker.
As you can clearly see from this graph, Compete.com is estimating that HedgeCo.net has over 3 times as many Unique visitors as HedgeFund.net and BarclayHedge.com
Evan Rapoport, Co-Founder of HedgeCo Networks, has been blogging up a storm over at his Capital Introduction Blog.
Borrowing from years of experience raising capital for hedge funds and other institutions, Evan takes a very direct and knowledgeable approach to navigating through the often tricky waters surrounding marketing your hedge fund.
First, the basics. What is hedge fund third party marketing? Third party marketers (3pm’s) are essentially hedge fund brokers. They represent various hedge fund products and introduce and sell these products to qualified investors. As a result of the introduction and follow up by the marketer, if an investment is made, the 3pm gets compensated. Usually compensation comes in the form of a portion of fees. The ’standard’ 3pm fee is 20/20. That is, twenty percent of both the management fee and the performance fee. This is usually paid to the 3pm’s brokerage firm as the fund receives its fees, and is usually paid to the marketer for the life of the client.
Where does a hedge fund manager find third party marketers to market their hedge fund? The Third Party Marketers Association (3pm.org) estimates there are about 500 third party marketers in the United States. Not very many, relative to the amount of hedge funds that are out there. There are several firms like mine, HedgeCo Securities, that are set up to exclusively market hedge funds. You can find these firms by searching some of the various hedge fund website service provider directories, or by looking at 3pm.org. Keep in mind, with some 10,000 estimated funds, and only 500 3pm’s, it is easy to realize why 3pm’s have a reason to be picky. So if you are a hedge fund that is less than 10-25 million (and I am being very generous here), don’t be surprised if you do not find a third party marketer to represent your fund…
Evan Rapoport also wrote a 3-part series on Hedge Fund Administration and how it not only is necessary for the running of a hedge fund, but is also crucial for your investors and your marketing efforts. This series is a must-read for investors and hedge fund managers alike.
There have been many questions about the Hedge Fund Lock-ups which were announced by Cerberus Capital today. Many of the explanations & by the major media outlets have been unclear if not incorrect.
One of the main misconceptions with most of the articles presented in the media is that the Lockups will affect existing hedge fund investors. This is not the case, as the Lock-Up period will only be effecting investors who choose to move their investments to the new funds created by Cerberus Capital in the future.
To balance out the 3-year lock-up, the new Cerberus funds will be offering lower management fees. The success of this new structure will no doubt be watched by hedge fund managers around the world.
1. What is a Lock-Up Period?
A lock-up period is the time during which investors are prohibited from redeeming their shares. Hedge funds often have lock-up periods for funds so that the firms are able to take a longer investment horizon. The Lock-Up period is defined in the Fund’s Private Placement Memorandum.
Tradionally a Lock-Up period will be 1 year. With the possibility to redeem every quarter after a 30-60 day notice.
I received this email from Daniel Viola at Sadis & Goldberg LLP this morning
Don’t be surprised if you receive a subpoena or are contacted by the Securities and Exchange Commission (”SEC”). The SEC has significantly increased its enforcement efforts since the recent discovery of certain high profile Ponzi schemes. Effective August 11, 2009, the SEC has also made it easier for its staff attorneys to issue subpoenas. [1] Thus, the SEC staff attorneys will no longer have to obtain formal approvals to issue subpoenas; instead, they will simply need approval from their senior supervisor. If you receive an inquiry letter or subpoena from the SEC, remain calm. This is not uncommon given the current regulatory climate. Above all, do not respond without first contacting legal counsel.
The SEC appears determined to issue more subpoenas and give people more incentives to cooperate with investigations as it works to enhance its oversight of the financial markets. The SEC generally has broad powers to conduct investigations of potential violations of the federal securities laws and often works with the Department of Justice in connection with joint proceedings, often known as “parallel proceedings.” Our Regulatory Practice Group consists of former SEC personnel and litigators with experience regarding civil and criminal proceedings. Please feel free to contact Daniel G. Viola at 212.573.8038 (or dviola@sglawyers.com) or Christiaan Johnson-Green at 212.573.8169 (or cjohnsongreen@sglawyers.com) with any questions.
In the wake of the subprime meltdown and the Madoff scandal, one of SEC Chairwoman Mary Schapiro’s first official actions was to streamline requirements for initiating formal investigations. Formerly, the full SEC Commission had to take action at a scheduled meeting in order to approve a formal investigation (which arms SEC investigators with subpoena power). In February of 2009, Chairwoman Schapiro’s changes allowed Commissioners to sign off on formal investigations outside of scheduled meetings and allowed certain investigations to be approved by a single Commissioner.
On August 5, 2009, the Director of the SEC’s Enforcement Division, Robert Khuzami, announced that the SEC had adopted an even more aggressive approach: the Commission had approved an order delegating the Division Director authority to approve formal orders of investigation, and Director Khuzami stated that he intended to further delegate this authority to Division senior officers throughout the country. According to Director Khuzami, “This means that if defense counsel resist the voluntary production of documents or witnesses, or fail to be complete and timely in responses or engage in dilatory tactics, there will very likely to be a subpoena on your desk the next morning.”
The changes in SEC policy are indicative of the agency’s overall shift towards greater emphasis on enforcement actions. Director Khuzami pointed out that “Comparing the period from late January to the present to roughly the same period in 2008, the Division has opened 10% more investigations (approximately 525, compared to 475); has been granted 118% more formal orders (which grants us subpoena power) (275, compared to 126); has filed 147% more TROs (52, compared to 21); and has filed nearly 30% more actions (397, compared to 306).”
If you’ve talked to a hedge fund manager for any amount of time, the topic of prime brokers will come up. One of the fundamental issues when setting up a hedge fund is finding a prime broker who will fit your balance of price vs. services rendered.
Andrew Schneider has been appointed as Director of the HFA Southeast Chapter. In this role he will lead regional efforts to foster growth and development of the hedge fund community throughout the Southeastern U.S.
The inherent problem with Alexa is that it estimates the traffic based on the number of people who use the Alexa Toolbar (which is flagged as spyware by most antivirus programs). These estimations give a general idea of how much traffic a site gets, but because of the flawed methodology, Alexa can easily be gamed to show more traffic than a site actually gets. For more information about the inherently problems with Alexa rankings read this creative blog entry titled “
