Abstract

Hedge funds have expanded the spectrum of alternative investments and offer sophisticated investors a variety of professionally managed portfolios. According to their legal status and registration, hedge funds are classified as offshore or onshore. This chapter discusses offshore hedge funds and empirically contrasts them with their onshore counterparts using statistical information obtained from Bloomberg Professional Information Services. The differences between onshore hedge funds and offshore hedge funds respond to differences in the clientele each one serves, their regulatory constraints, size, performance, and volatility. As a result of that comparison, the chapter concludes that offshore hedge funds represent an attractive market alternative for tax-exempt institutional investors and individuals not subject to tax responsibilities in their home countries.

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