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Crypto Hedge Fund Formation

FAQ

  • What are the CV5 Platforms?
    CV5 is for traditional asset classes and those managers wanting to launch a hedge fund with traditional investment assets such as fixed income, equities, FX, derivatives, real estate. CV5 Digital is for fund managers looking to launch and manage a digital asset or crypto hedge fund.
  • How Long Does it take to Launch a Fund?
    4 Weeks
  • Is there an audited track record for my investors?
    Yes, your fund's performance will have an audited track record, providing transparency and credibility to potential investors. Audited financial statements will be prepared annually and must be filed with the Cayman Islands regulator within 6 months after the financial year end.
  • Who is CV5 Capital
    Founded in 2021, CV5 Capital has deep expertise in hedge fund and crypto fund services. We provide manco operating, risk and governance oversight to many different funds for third-party managers so they can focus on raising capital, the investment strategy of their fund and building an audited track record.
  • Where are CV5 Capital, CV5 and CV5 Digital located?
    The Cayman Islands - the world's leading domicile for hedge funds and even greater concentration of crypto hedge funds.
  • If I am interested in a career at CV5 Capital, where can I find job opportunities?
    We are always looking for smart and driven individuals to join our team. Please contact us: careers@cv5capital.io
  • What exchanges can i trade on?
    Any. We have VIP relationships with all major exchanges and will open an account in the name of your fund.
  • Is CV5 Digital SPC regulated?
    Yes: Mutual Funds Act of the Cayman Islands
  • What is the minimum capital i need to launch a fund?
    Any amount but be mindful of the ongoing fund expenses you will have. Contact us to discuss.
  • What do investors receive in return for their subscription?
    Investors will receive shares: participating, non-voting, redeemable shares
  • How long does it take to launch a hedge fund?
    4 weeks
  • What is included at launch?
    1. all legal documentation for your fund - prospectus, investment management agreement, advisory agreement, investor subscription agreement, launch resolutions 2. on-boarding with all service providers 3. bank account opening for your fund 4. ISIN, CUSIP, LEI, Bloomberg code and other international securities identifiers, as required 5. Prime broker account opening 6. For Crypto funds - exchange account opening with VIP relationships 7. For crypto funds - custodian accounts with leading custodians
  • What are the ongoing fund expenses?
    We charge a transparent platform fee which includes all fund expenses. This provides certainty when running your fund. There are no other expenses by any other service providers.
  • Is there a minimum assets under management to launch?
    No
  • What is the minimum investment amount per investor?
    USD100,000 or equivalent in other currencies.
  • Can I have more than one share class?
    Yes
  • Why launch a fund with CV5 as opposed to setting up my own fund?
    Setting up a stand-alone fund is typically very expensive with legal counsel, structuring and the time spent structuring the fund with onshore and offshore counsel. With CV5, we have done the heavy lifting so you do not need to. Launching a fund has bene streamlined so each fund will be launched in 4 weeks. These days, running a hedge fund requires being regulated which means significantly more onerous compliance and governance expenses plus the risk of enforcement penalties for breaches. By outsourcing to a highly experience firm, actually based in the Cayman Islands, provides significant cost savings through economies of scale. For crypto funds, our expertise and VIP relationships and partnerships with other crypto service providers provides added benefits to all funds.
  • What management and performance fees can i charge?
    This entirely up to you. The standard of 2% management fee and 20% performance fee applies for many funds but you may decide this as you see fit.
  • Who is the fund administrator?
    An independent fund administrator ranked #1 in an independent survey, privately owned with a strong reputation for cost-effective and reliable fund administration solutions. Among the top fund administrators by number of funds, servicing more than $260 billion AUA. Established in 1991, 2,500+ employees - offers expertise in administration, compliance, security, IT, and accounting disciplines. About 75% of the team hold advanced degrees and certifications including MBA, CPA, CFA, and CA. Technology - proprietary fund administration technology to support every fund structure and asset class traded. The internal team of 300+ IT professionals focuses on optimizing operational efficiency, maintaining strong network security, and providing comprehensive best-in-class reporting solutions. This strategy eliminates third-party software costs and time spent integrating outside technology, enabling them to offer solutions that are rapidly agile at an excellent industry-leading cost for value. With teams in the U.S. and India, they are able to provide clients with 100% uptime and 24/7 support. All NAV operations are ISAE 3402 Type 2 certified.
  • Who is the auditor?
    Contact us
  • Do I need my own investment management entity?
    Yes, you need an investment management entity in order to receive your management and performance fees. Unless you are conducting an activity onshore where you require regulatory permissions, we can certainly set up an offshore investment management entity at the same time as we are setting up your fund. Contact us for more information on this.
  • Can I allow US investors to invest in my hedge fund?
    Yes, provided they are accredited investors.
  • Can I launch my fund on a stock exchange?
    Yes : for an additional fee we can list your fund on an internationally recognized stock exchange. Listed securities often provide greater distribution options as many institutional investors are restricted to investing in listed securities. Contact us for more information on listing your fund.
  • Can my fund pay dividends?
    Yes - you can have your fund or fund range pay dividends. Please note that dividends may only be paid from 'profits' of the fund however and not from capital.
  • Who are the directors of the fund?
    The directors each have over 25 years of senior level industry experience in the asset management industry in addition to a number of years in digital asset funds, crypto technology, blockchain and operations. Experience working for Citi, Credit Suisse, Commerzbank, Canadian Pension Plan Investment Board, and Van Eck Global. Both directors are registered with CIMA under the DRLA.
  • Is there independent compliance?
    Yes, independent compliance is provided to each fund. This involves the roles of Anti-Money Laundering Officer (AMLCO), Money Laundering Reporting Officer (MLRO), Deputy Money Laundering Reporting Officer (DMLRO). AML Compliance polices and procedures are also provided.
  • Who does the FATCA/CRS reporting?
    We do, on behalf of your fund.
  • What are the benefits of CV5 Compared to Launching my own fund?
    Significant cost efficiencies as we have conducted the legal and operational structuring Speed to launch is just 4 weeks. Enables you to focus on your fund, building your audited track record. As the fund manager, you still receive the management and performance fees plus full discretion of your investors and your strategy.
  • What is the cost to launch a fund and the ongoing Expenses?
    All fees are included in a platform fee which is transparent and cost effective. There are no hidden expenses. Please contact us for more information.
  • Does CV5 Digital SPC have a Legal Entity Idenfier?
    LEI: 984500137 A89X9H83F21
  • What is included in Launching my fund on CV5 Digital?
    In a word "everything." To launch your fund via CV5 Digital, you are provided with the following (drafted with your input): Prospectus Subscription Document Investment Management Agreement Investment Advisory Agreement Launch Resolutions ISIN/CUSIP/Bloomberg Ticker LEI Code On-boarding with all service providers already in place plus bank account opening and exchange account or prime brokerage accounts.
  • Can I accept investor subscriptions in crypto e.g. USDC, USDT or BTC etc?
    Yes
  • How long does it take to launch a fund?
    4 weeks
  • What is the minimum investment amount per investor?
    Must be a minimum amount of USD100,000 (or equivalent in other currencies).
  • Do i get an ISIN & CUSIP?
    Yes
  • Do i need to appoint a custodian?
    No, but it is advisable to do so to provide comfort to investors. We have relationships with most of the leading regulated custodians
  • I do not currently have an investment management company. What can I do?
    We can set up an offshore investment management company for you and open a bank account with the same bank as your fund. You manco will receive your management and performance fees plus be listed in your fund prospectus.
  • Who calculates the monthly Net Asset Value?
    The fund administrator and then confirmed by you as the investment advisor to the fund.
  • How frequent is investor reporting?
    Most funds provide monthly investor reporting. Audited financial statements will be distributed once the audit is complete.
  • Can my fund invest in defi?
    Yes
  • Altcoin
    Crypto assets other than Bitcoin.
  • Blockchain
    A distributed and immutable digital ledger that processes and records transactions across a network of computers.
  • Centralized
    A system or organization in which decision-making, control, and authority are concentrated in a central point or a small group of entities, often resulting in a single point of failure or authority.
  • Cryptocurrency
    A digital form of currency that uses cryptography for secure and decentralized transactions. Crypto assets power blockchain networks, and serve as incentives for the verification of transactions.
  • Decentralized
    A system or organization that distributes decision-making, control, and authority across multiple entities or nodes, reducing reliance on a single central authority and enhancing resilience and transparency.
  • Decentralized Applications ("dApps")
    Software applications that run on top of blockchain networks. These applications are digital, decentralized equivalents of apps on a mobile device, and vary from financial to gaming to third-party services.
  • Decentralized Exchanges ("DEXs")
    Decentralized applications (“dApps”) that enable users to trade cryptocurrencies directly with one another without the need for an intermediary, such as a bank.
  • Decentralized Autonomous Organizations ("DAO's")
    A decentralized autonomous organization (DAO), sometimes called a decentralized autonomous corporation (DAC), is an organization managed in whole or in part by decentralized computer program, with voting and finances handled through a blockchain.
  • Digital Asset
    Another term for a “crypto asset.” These assets are digital in form, and were created on a blockchain.
  • Governance Tokens
    Tokens that grant holders the right to participate in decision-making processes within a blockchain network, such as who to hire as a developer, future roadmap decisions, or protocol treasury purchases.
  • Halving
    The monetary policy of Bitcoin (and similar crypto assets) is deflationary by design: roughly every four years, the reward for mining is halved, slowing the creation of new bitcoins by half. Also sometimes referred to as “the Halvening.”
  • Hard Fork
    The ability to copy underlying code of open-source existing blockchains and create a new blockchain with the same underlying functionality. This potentially unlocks new levels of competition and innovation.
  • Interoperability
    The ability of different blockchain networks to communicate and interact with each other seamlessly.
  • Layer 1 Blockchain
    Blockchains that process and record transactions of decentralized applications (“dApps”). Some blockchains, like Ethereum, have Layer 2 blockchains built on top of them for scalability.
  • Layer 2 Blockchain
    Secondary blockchain layers that enhance scalability and functionality of Layer 1 blockchains by processing transactions of decentralized applications off the main chain. Layer 2 blockchains rely on the underlying security of their Layer 1 chain.
  • Liquidity Pools
    Pooled funds used to facilitate trading and liquidity in decentralized exchanges (DEXs).
  • Liquid Staking Derivatives ("LSD's")
    Protocols that enable individuals to stake their assets (lock up assets to support network security) while also being able to hold, use, and trade a derivative of that capital.
  • Mining
    A process by which new tokens on proof of work blockchains are generated, where computers solve computationally intensive problems to earn “block rewards.”
  • Non-Fungible Token ("NFT")
    A digital asset stored on a blockchain that represents ownership over a distinct, unique item. Dollars or Bitcoin are examples of “fungible” items as each unit is equivalent; conversely every NFT is “non-fungible” as each unit is entirely unique in its characteristics.
  • Oracle
    An external data source that provides real-world information (stock prices, sports outcomes, political polling data) to smart contracts on the blockchain.
  • Permissionless
    A characteristic of blockchain networks that allows anyone to participate without needing approval.
  • Proof of Stake
    A consensus mechanism in blockchain where participants (validators) are chosen to create new blocks and validate transactions based on the amount of cryptocurrency they hold and are willing to "stake" as collateral.
  • Proof of Work
    A consensus mechanism in blockchain where participants (miners) solve complex mathematical puzzles to validate and add transactions to the blockchain.
  • Protocol
    A set of rules and conventions, embedded in code, that govern a blockchain network.
  • Real World Assets ("RWA's")
    Physical assets (e.g., real estate, art) represented digitally on a blockchain.
  • Staking
    The process of locking up cryptocurrency as collateral to support network security in return for earning tokens.
  • Smart Contract
    Software that functions as a self-executing contract with predefined rules and conditions that automatically executes on a blockchain.
  • Trustless
    A system or transaction mechanism that doesn't require trust in intermediaries or third parties.
  • Web2
    The second generation of the internet characterized by user-generated content, interactive web applications, and social networking, in contrast to the static websites and one-way communication of Web 1.0. Also known as Web 2.0.
  • Web3
    The next phase of the internet, powered by blockchain and decentralized technologies, aiming to create a user-centric and trustless digital environment where individuals have more control over their data, interactions, and the platforms they spend their time and money on. Also known as Web 3.0.
  • Zero-Knowledge Proof ("ZK Proof")
    A cryptographic practice that uses mathematical proofs to prove the validity of a transaction without providing additional identifying information to either transacting party. ZK proofs are one of the measures employed by certain blockchains to prioritize user anonymity and privacy.
  • VASP
    Virtual Asset Service Provider
  • CIMA
    The Cayman Islands Monetary Authority or CIMA for short, is the financial regulator of the Cayman Islands.
  • Mutual Funds Act
    The Mutual Funds Act of the Cayman Islands, regulates all hedge funds.
  • Side Letters
    A fund side letter is a legal agreement between an investment fund and one or more specific investors. Here are some common elements found in fund side letters: Fee Arrangements: Side letters might specify customized fee arrangements for certain investors. This could include reduced management fees, performance fee breakpoints, or other fee-related considerations. Redemption Terms: Some side letters address redemption terms, allowing certain investors more favorable redemption terms than those outlined in the fund's standard documents. This might include shorter notice periods or exemptions from certain redemption restrictions. Reporting Requirements: Investors might negotiate specific reporting requirements beyond what is typically provided in the fund's regular reporting to investors. This could include more detailed or customized information on the fund's performance or operations. Governance and Decision-Making: Side letters may include provisions related to governance, granting specific investors certain rights or influence over certain decisions made by the fund, such as investment allocations or other strategic decisions. Confidentiality and Non-Disclosure: Side letters often contain confidentiality provisions, restricting the disclosure of certain information to third parties. This is particularly relevant when the terms of the side letter differ from the standard terms offered to other investors. Regulatory Compliance: Investors might request specific provisions related to regulatory compliance or certain legal restrictions they face. For example, tax-exempt investors may seek assurances that the fund's activities comply with tax regulations applicable to them. Investor-Specific Provisions: Side letters may include provisions tailored to the specific needs or preferences of a particular investor. This could include restrictions on certain types of investments, participation in co-investment opportunities, or other investor-specific considerations. It's important to note that while side letters can provide flexibility for fund managers to accommodate specific investor needs, they can also create complexity and potential conflicts of interest. Therefore, fund managers typically carefully review and consider the implications of side letters, and legal counsel is often involved in negotiating and drafting these agreements to ensure they align with the overall legal framework of the fund.
  • Performance Fees
    Hedge fund performance fees, also known as incentive fees, are a compensation structure that hedge fund managers use to align their interests with those of their investors. Unlike traditional asset management fees, which are typically charged as a percentage of assets under management (AUM), performance fees are contingent on the fund achieving positive returns.
  • Hurdle Rate
    The hurdle rate is a predetermined minimum rate of return that the fund must achieve before the performance fee is applied. It ensures that the fund manager is compensated only for returns that exceed a certain threshold. Commonly used benchmarks for the hurdle rate include a risk-free rate (such as Treasury yields) or a market index like the S&P 500.
  • High-Water Mark
    The high-water mark is a mechanism that prevents the fund manager from collecting performance fees on the same profits more than once. Once the fund surpasses its previous peak net asset value (NAV), performance fees are calculated on the gains made beyond that high-water mark.
  • Performance Fee Period
    Performance fees are usually calculated and accrued on a periodic basis, often annually or quarterly. This ensures that the fund manager is compensated for sustained positive performance over the specified measurement period.
  • Equalization Accounting
    Equalization accounting is a financial accounting technique used in the context of investment funds, particularly open-end mutual funds and hedge funds. The purpose of equalization accounting is to ensure that all investors in the fund are treated fairly, especially when there are differences in the timing of their investments and redemptions. Here's how equalization accounting typically works: Timing Differences: Investors in open-end funds can buy and sell shares at any time. However, the fund's net asset value (NAV) is typically calculated at the end of each trading day. This creates a potential timing difference between when an investor places an order to buy or sell shares and when the NAV is calculated. Equalization Account: To address this timing difference, funds may use an equalization account. When an investor places an order to buy or sell shares, the transaction is processed at the next calculated NAV. However, to ensure fairness, the fund may maintain an equalization account to adjust for any discrepancies. Adjustments to NAV: When an investor buys shares after the NAV is calculated, the fund adds money to the equalization account to account for the fact that the investor is buying shares at the next NAV. When an investor sells shares after the NAV is calculated, the fund deducts money from the equalization account to account for the fact that the investor is selling shares at the previous NAV. Calculation Process: The equalization process typically involves adjusting the NAV for new purchases and redemptions by adding or subtracting from the equalization account. The equalization account is usually a temporary account, and adjustments are made regularly to reflect the most current investor activity. Fair Treatment: The goal of equalization accounting is to ensure that all investors are treated fairly by allowing them to transact at the same NAV, regardless of the timing of their investment or redemption requests. Equalization accounting helps maintain equitable treatment among investors by adjusting the fund's NAV for the impact of investor transactions occurring after the NAV calculation. This process ensures that all investors, whether buying or selling shares, are transacting at a fair price relative to the fund's net asset value.
  • AUM
    Assets Under Management
  • Lock-up
    An investor lock-up is an agreed timeframe by which an investors capital is "locked-up" in the fund. This provides certainty to the fund manager and avoids investors investing one month and redeeming their investment the following month. A lock-up period could be for any length of time, so 3 months, 6 months or even 1 year in some cases. A lock-up can be either a hard lock-up, whereby the investors are unable to redeem their shares for the stated period or a soft lock-up whereby investors can redeem their shares but will be subject to an early redemption penalty.
  • Subscription & Redemption Frequency
    The period for which investors may invest. Most hedge funds will have monthly subscriptions and redemptions.
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