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Hedge Fund and Fund-of-Funds Accounting Principles

This class is designed to be "hard core" hedge fund and fund-of-funds accounting. It contains a brief overview of the hedge fund industry, solely as a framework in which a student can gain a total perspective; its size and scope and the types of fund structures that have emerged in the past few years and to emphasize how the industry is forever "evolving". Core curriculum includes a comprehensive, in-depth understanding of the fund accounting process, from the accounting sections of the offering memorandum (such as fund setup rules and fee calculations), to the practical application of those rules through case studies and student participation exercises, for a variety of fund structures. The concept of reasonability is demonstrated and emphasized. Explanations of and suggestions for implementation of the SEC compliance rule 203 (b)(3)-2 are interspersed throughout the course.

Sample topics taught include, but are not limited to, those listed below. More or less detail is covered, depending on the course level and on the client agreed-upon curriculum:

The Alternatives Marketplace, its history, participants, size and scope (e.g. hedge funds, funds-of-funds, private equity funds)
Types of Legal Structures such as LLCs, LPs, 3(c)(1)s, 3(c)(7)s, their characteristics and requirements
Types of Fund Structures such as multi-class, master-feeder, SPCs, parallel, side-by-side
Setting up a Fund - the Offering Documents and how to understand them
Pre-Fund, Fund Launch Process Flows, such as
- Activities surrounding the selling of the product
- Calculations of trailing commissions of brokers and agents that are selling to investors
- Acknowledgements of receipts of funds
- Monitoring of blue sky registrations
- Explanation of money flows
- Escrow interest calculation methodologies
- O&O replenishment schedules
Fund Accounting Process Flows, such as
Break periods and accounting cycles
Daily net asset valuations by entity, by total investment, by series, by class, by investor
Subscriptions, distributions and redemptions
Capital changes, allocations and reallocations to various trading entities
Special investor allocations such as �new issues�, "side pockets" and preferrential allocations
Income and expense calculations and allocations
Fee calculations and accruals and prorated expenses for each trading entity
- GP reallocations and deferred fees
Recordkeeping and Shareholder Services essential to an investment product.
Step-by-step explanation of the core transaction/data processing and reporting information that traders, fund managers, investors and third party marketers use on a daily basis
Explanation of the complete set of books and records for each investment product, including balance sheets, income statements, general ledgers and performance tables
Current Issues and how they affect hedge fund accounting, such as
- Transparency
- Look-through testing
- Liquidity
- Performance calculations
- Risk management and reporting