How Does a Forex Fund Work?

Although the name still sounds exotic to some, a forex fund in the US is typically a private investment partnership set up so as to allow it to remain exempt from the registration requirements federal and state law imposes on publicly-traded funds. When set up outside the US, a forex fund is usually set up as an exempt limited company in a low or zero tax country, such as the Cayman Islands.

As a private fund, a forex fund cannot legally advertise either in the US or abroad and it can only accept investors “known” to the fund manager. However, a fund manager may have a website to advertise its advisory business in most cases and the fund manager may offer access to the forex fund’s daily performance through a password-protected website. Many countries have rules similar to those of the US in this regard.

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