TRANSCRIBED FROM: https://adamtracy.io/video/bvi-hedge-fund-registration/
We talked about the BVIs before in a very general sense, but following up and talking about the BVI. Less as a asset protection locale and more of a hedge fund domicidal locale. And they have an interesting structure, which I think for crypto funds works really well, given the flexibility and given the relative lack of regulatory hurdles that you have to jump through to get a fund launch, which you find in jurisdictions like the Cayman islands. Plus the cost is spectacular compared to the Caymans when it comes to cost of incorporation, cost of banking. Minimum deposit is much lower. And you’ll find that the attorneys, custodians, fund management people are all much less expensive than in the BVIs.
So, you got three fund structures. The entry fund, which I think is a good segue if you’re sort of getting your toes wet into the crypto fund world, is the incubator fund. And the incubator fund can be registered in a number of days, and it’s more of a registration as opposed to an application. So, you can register and receive in a couple of days.
Some limitations. 20 investors, minimum investment of 20,000, max assets under management of 20 million. You do not have to have an auditor. You do not have to have a custodian, and you do not have to have fund admin company. It does have a life cycle of only two years. So, if you’re looking for like a track record, especially if you’re a trader, and you’re looking for that track record. Maybe you’ve got some investors, maybe you’re doing a friends and family, maybe you think you can just keep it small and run a good track record, start with incubator fund. It’s cost effective. It’s quick. Get off the ground. You’ll find that the majority of hedge fund investors wouldn’t find 20,000 as the minimum to be entirely objectionable. You can take [inaudible 00:02:38] payments. So, if you’re taking payments in crypto therium, whatever, you can take that.
But space to grow because you have to do something. Because the incubator fund has a lifespan of two years, and so you basically at the end of the two years or right off the bat if you’re in that space and you’re ready to go, I guess to a larger extent, you have two options. Next is the approved fund. The improved fund, max 20 investors, no minimum investment. No minimum investment. Total max investment of 100 million and no term. No term.
So, a little more complicated. The process to become an approved fund as the name would suggest is in fact more involved, more costly, a little more timely, but you can raise more, and illogically perhaps, there’s no minimum investment. There was no minimum investment.
So approved fund, it’s sort of … I don’t advise a ton of people to go to the approved fund route. I advise everybody to sort of start with the incubator and then move to the professional fund. Professional fund is sort of your main fun category under BVI law. $100,000 minimum investment, which is pretty common for most hedge funds. No maximum investment. It does require an auditor. It does require custodian. Does require a licensed investment manager. Does require a fund admin company.
So, really your professional fund is the route where you want to end up. But for the cost and the speed and the parameters that are involved with being a professional fund, start with the incubator fund. Start with incubator fund because you’re going to build a track record, and you don’t have to wait the two year cycle of the incubator fund to transition out of the incubator fund. You can transition at anytime to a professional fund. But for purposes of how this investment strategies work and how you attract investors in what’s really a crowded space. It’s become a very, very, very crowded space. And most people jump in with no track records, and I think that’s insane. I think you have to start small, even if you do it domestically. My advice would be start a fund that only has five, 10, 20 million. I think that’s very reasonable. Rational fund managers do that. Even in the real world. In the real world, the securities world, the commodities world, you’ll see people start these funds to build a track record, and then when they transition into a larger fund, when they unwind one fund, want to grow to another fund. Or in this case, when they’re going in the incubator fund, they want to transition to the professional fund. You have something to go on. You have something to market. You have some sort of track record other than a YouTube page.
And that’s where this industry has to go. And BVI is a great locale for traditional hedge funds. It’s not as big as the Caymans, but I think you’ll find, especially with the incubator fund structure for startup hedge funds, it’s an ideal location, especially in the crypto space, because again, you have a lot of legal uncertainty, especially in the U.S., and you’ve got a lot of investment coming from Asia, and you’re going to find that most high net worth Asian investors don’t necessarily want exposure to us tax laws. Fair enough. But you don’t have that, obviously, in the BVIs.
So again, incubator approved and professional fund. I’m a big proponent of the incubator fund. You have any questions on any level? Feel free to hit me up. AdamTracy.io or [email protected] is my email. Feel free to hit me up with any questions you have, and I’ll talk to you later.
A former professional rugby player, Adam S. Tracy brings over twenty years’ experience as an attorney, consultant and dealmaker with a particular focus on cryptocurrency, digital products, payments and immersive corporate structures. As an accomplished executive and advisor to high risk merchants and stakeholders, Adam has proven himself as a results oriented, decisive leader with proven success advising early market entrants, technology adapters, as well as established participants across a wide range of verticals. Adam Tracy’s attack-first personality allows him to excel in dynamic, demanding environments including complex corporate negotiations, distressed environments and regulatory investigations.
In addition, Adam S. Tracy also has a successful track record co-founding high risk industry ventures, building & leading cross-functional teams, and spearheading diverse corporate transactions. A serial entrepreneur, Adam has successfully started and created exits across a wide swath of markets, including various mobile SaaS ventures, nutraceuticals, peer-to-peer payment systems, and several telemarketing-based ventures. Moreover, as a recognized expert in the payments field, Adam Tracy has been a blockchain and digital currency evangelist and influencer since the early days of Bitcoin.
Utilizing his proprietary “Pre-Event Driven™” strategy for decision making, Adam S. Tracy further leverages his over twenty years’ experience to create cost-effective, value-add solutions for each client. A data-driven acolyte, Adam continually refines his strategies based on field studies and data collection. Moreover, Adam Tracy further augments his range of solutions by actively networking with regulators, liquidity providers, legal and compliance experts, deal-flow brokers, investors and management of leading high risk industry ventures.
Adam S. Tracy earned his Bachelor of Science in Computer Applications and Bachelor of Science in Finance from the University of Notre Dame. He subsequently earned his Masters in Business Administration from the DePaul Kellstadt Graduate School of Business, while concurrently earning his Juris Doctorate from the DePaul College of Law. Adam lives outside Chicago with his with his wife, four dogs, and two cats.
On the Web: https://www.adamtracy.io
Email me: [email protected]