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Why do most Non-US investors choose not to invest in US hedge funds?
Asked by HedgeCo Developer (Investor)

Answer By Julie Scuderi

Because of the nature of the U.S. tax and securities laws, it is easy to see why non-U.S. investors typically will not invest in hedge funds that are based in the United States. Many hedge fund managers do maintain both U.S. and non-U.S. components. Given the global complexity of the investment community, hedge fund managers want to have both types of investment vehicles so that they attract all kinds of investment dollars. The laws and regulations of the United States are directed not just to limiting the behavior of its citizens, but also to preventing money-laundering and other improper uses of offshore investment vehicles.

Answer By jean helft

The US and many other countries have tax agreements and the US tax authority would oblige US funds to withhold 15% of dividends and communicate to the other country that Mr. Soandso has revenues from the US, which in turn would raise questions.
Not so for Bermuda, Caïman Islands, British Virgin Island, Dutch Antilles etc...who have (and don't want to have) such bi-lateral agreements.