Liquidating a fund

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While many of the managers and traders at these funds will go on to work for other firms, many of these managers and traders will start new hedge funds and potentially with some of the same investors.

In either case, there are a few things that a hedge fund manager will need to do in order to ensure the orderly liquidation and winding down of the hedge fund.

Make the final wind down and distributions The final wind down is the process of liquidating all of the fund’s positions to cash and then transferring the fund’s assets to the fund’s bank account.

From the bank account, the manager will then be able to distribute the assets to the investors pursuant to the final accounting by the administrator and/or auditor.

(However, the manager will need to be careful that the mention of the new fund does not rise to the level of a public offering – the attorney can discuss this with the manager.) During this time, it is critical for the manager to keep the lines of communication with the investor open.

When a Purchase Order is approved and submitted to the Enterprise Accounting System, the funds of the budget being charged are encumbered (funds reserved) and cannot be used for any other purchases.

When encumbered funds are not used; for example, due to amount expended is less than the original amount encumbered, these funds should be liquidated (process of releasing the unused funds) in order to free the funds for other uses.

Download PDF When "Liquidating Trust" is mentioned, most people associate this with bankruptcy.

In a bankruptcy, a liquidating trust may be formed whereby certain assets are placed in a trust for the benefit of creditors who may have certain claims against those assets.

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