How to Start a Hedge Fund in Canada?

Hedge fund permits the group of people to invest the money given by investors for investing. These firms do not work like normal firm they take the investment risks that are not allowed in buying or selling of assets in local firms. Hedge funds also demands high fees for managing the investment usually as “2 and 20.” Managers demand 2% of capital as a fee and earn 20% annual return that they file.

Starting a hedge fund in Canada normally takes a month, and the fees can be between CAD 25,000 and 35,000. It also need a qualified person in finance and investing. Hedge fund managers should have worked at a large selling organization or institutional bank and have completed certifications like the Chartered Investment Manager or financial analyst. Managers without background in finance will have difficult time in obtaining customers and building their assets.

 Hedge fund managers must first register their fund in the province where it will work.  Canada is unusual in its regulatory it does not have a single regulator at the national level. The rules in each province are different. Combined, the provincial and territorial regulators of the nation are the Canadian securities administrator. 

Ontario is the most important for the registration of hedge funds and check managers in Canada.

 If a fund is giving investment advice managers must register as financial advisor. If the portfolio manager wants to sell securities in a hedge fund, for this they must also register themselves as a dealer. Advisors need to register in a specific province, while dealers must register in all the provinces and territories in which the fund will be sold. Following registration manager will be bound by reporting requirements to provincial regulators. The hedge fund is bound by federal and provincial laws check on crimes like financial terrorism.

Finally, a hedge fund requires capital. Raising money requires a manager who is able to sell the fund and investment plan to individuals who have money.  There is a minimum requirement in each province to be registered as a hedge fund. In Ontario, requirements are

  • CAD 25,000 for a manager of portfolio
  • CAD 50,000 for an excepted market dealer
  • CAD 100,000 for manager of investment.

 There are usually two options when marketing the fund. Either the firm sells itself with booklet it does not. This shows firms investment plan risks, structure, and major components. When a fund does not use this, a manager has more choices in how he or she sells the fund.

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