Hedge Fund Prospectus
What is a prospectus? Does a hedge fund issue a prospectus?
Broadly, a prospectus is a legal document that describes the investment being offered. In the case of hedge funds, a prospectus would be distributed to potential investors informing them about the funds objectives, investment philosophy and risk tolerance as well as fee structure, reinvestment and divestment. For instance, a hedge fund prospectus may disclose that the fund uses high risk international currency arbitrage, charges 10% of profits as a management fee and only allows capital withdrawals at a set time of year. These items are only the most basic, though often most scrutinized, elements of a hedge fund prospectus.