Seemingly, hedge funds can be structured in several different ways. Both hedge fund service providers and hedge fund managers have defined some innovative hedge fund structures for meeting the tax needs and specific regulations of the manager. Some of the most common ones are:

Domestic hedge funds
These funds are very basic in structures and are typically organized as limited liability companies or limited partnership with management companies. In the structure of domestic hedge funds, the management company needs to be registered as investment advisers in the home state of the manager.

Offshore Hedge Fund structure
Offshore hedge funds are mysterious sounding vehicles but are quite common. They are typically structured as offshore business companies that are basically like domestic corporations with share holders and directors. This kind of hedge fund enters into the management contract with the management company which oversees the activities of investing and is subject to fund’s directors’ supervision.

Offshore Master Feeder structure
This kind of structure is more intricate and is designed for several reasons, mostly to allow the investors to get access to investment strategies without subjecting them to taxes. This hedge fund structure has three entities: one offshore based master fund and two feeder hedge funds among which, one is US based and other is offshore. Like regular offshore funds, the master feeder structure is also managed by a single manager.

Side by Side offshore hedge fund structure
This hedge fund structure is a mixture of domestic funds and offshore funds. Basically, a single manager runs two different funds in similar manners. But this kind of structure can create a lot of back office work for the manager as if the manager does lots of trading, there will be several trade tickets which will need to be split.

Which structure the hedge fund managers choose depends upon their own specific situation, specialty and experience. The factors that will influence their decision will be investment strategies, tax needs and amount of money allocated for the formation of the hedge fund. Experienced hedge fund attorneys will helps the manager in deciding upon certain issues and developing a plan to start the fund.

Above mentioned are the most common types of hedge fund structures. Although there are other hedge fund structures also like offshore segregated portfolio company structure and Delaware series LLC structure, the mentioned ones are the most commonly used structures in the market of hedge funds.