preview

Business Writing Trend Analysis

Better Essays

123 41th Avenue West
Vancouver, British Columbia, V1V 1V1
Phone: 123.456.7890 ABS
CONSULTANTS

September 28, 2011

Mr. James Dimon, CEO
J.P. Morgan Chase & Co.
270 Park Avenue,
New York, NY 10017
Subject: New market for hedge funds

Dear Mr. Dimon:

It is a pleasure for ABS Consultants to be working with J.P. Morgan Chase & Co. As follow-up to our initial conversations, we have considered various trends occurring within the financial arena, and have identified one trend specifically within the space of alternate investments that would most benefit your firm. The concept underlying this trend is the lack of accessibility to hedge funds for non-accredited retail …show more content…

The first is derived from the partnership structure. To withdraw money from a hedge fund, dependent on the fund, this can take anywhere from weeks to months: this being a result of having do legally deregister the investor as a partner, and pertinent to large investors, measures have to be taken to ensure the withdrawal of capital does not affect the strategy’s profit earning potential for other investors. The second downside resulting from the 499-partner constraint, is that well-performing hedge funds often have investment minimums in excess of $1 million3. The third disadvantage of hedge funds is their confinement by the SEC to seek new investors solely through word of mouth.

Where the opportunity lies

In examining hedge fund structure, we quickly recognize its primary limitation: exclusivity through the accredited investor clause. This clause states that for a hedge fund to avoid the basic limitations of other more traditional fund structures, retail investors must have a thorough understanding of the investment profile of the fund, as well as over $5 million in investible assets. For institutional investors, this number is $25 million. While this clause allows Hedge Funds to avoid registration with the SEC, it restricts the fund from accepting any non-accredited investors from investing in hedge funds. This population constitutes the vast majority of investors domestically. Furthermore, as

markets expand to less wealthy nations, we note

Get Access