10 Finance related movies to watch

 1. Wall Street (1987)

2. Margin Call (2011)

3. Boiler Room (2000)

4. The Wolf of Wall Street (2013)

5. Trading Places (1983)

6. Rogue Trader (1999)

7. Glengarry Glen Ross (1992)

8. American Psycho (2000)

9. Barbarians at the Gates (1993)

10. The Big Short (2015)

Onshore VS Offshore Hedge Funds

  

This topic got my attention because the firm for which I work provides services for Hedge Fund Administration. Hedge Funds are only for the Ultra Rich!

Before we understand the difference between Onshore and Offshore Hedge Funds, it's important to understand what is Hedge Fund?

A hedge fund is any privately offered, managed pool of capital for wealthy, financially sophisticated investors. 

 Investor capital flows into Onshore and Offshore hedge funds. From the manager's point of view, which one is more beneficial and what are the key differences between these two. Onshore funds are Domiciled in the USA whereas, offshore funds are domiciled in low tax jurisdictions outside the USA.

Both have different performance, investor flows & organizational designs.

The offshore market is larger compared to the onshore market also the growth rate seems to be higher in the offshore market than the onshore market. Onshore funds are organised as a limited partnership whereas offshore funds are under a corporate.

Offshore funds are more appealing to tax-exempt investors than onshore funds.

Onshore funds keep their status as private funds i.e. avoid registering or avoid being regulated under-investment company act of 1940. For these onshore funds use sections 3(c)(1) and section (c)(7).In the case of onshore funds, there is a limit on the number of investors. 

The offshore fund is more advertising friendly than the onshore fund. But onshore funds have more ability to attract investors & more distribution channels.

Fund Performance is much greater for the offshore fund manager.

For the same manager, same strategy, offshore funds have greater incentive fee & a greater management fee. Due to greater share restrictions of onshore funds than offshore funds, there is longer lockup periods, less frequent redemption & subscription periods.

Reference: "Onshore and Offshore Hedge Funds: Are They Twins?" by Hyuna Park (Minnesota State University) and Bing Liang (UMass-Amherst).