Digital Assets

Digital-asset funds can be set up as an open-end structure, similar to a hedge fund, or a closed-end structure, which is similar to a private equity fund. 

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Open end funds typically share commonalities, such as redemption and withdrawal rights, management and performance fees, and other aspects, but the most common thread lies in the type of investments or assets the fund will purchase. Open end funds generally invest in highly-liquid assets. With digital-asset funds, the key to investing in these highly-liquid assets is to invest in those assets that are traded on recognized exchanges, whether they are domestic to the United States, or offshore.

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Closed end funds differ from open end funds in that they do not invest in highly-liquid assets, rather they choose to invest in illiquid assets, such as coins in a pre-initial-coin-offering, or pre-ICO, the actual blockchain assets, non-fungible tokens (NFTs), and other non-exchange-traded assets and strategies. Many digital-asset funds will likely be classified as a closed end fund because of their strategies and style of trading.

 

Those fund managers who employ strategies that use more reliable and recognized exchanges that trade digital assets on a regular basis or even in high-frequency trading accommodations will find that an open end structure may be a better solution.  

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Because of the explosive growth of the digital-asset industry and the many ways an investment fund can purchase and trade digital assets, fund managers must be cautious and careful before taking steps to launch and manage a digital-asset fund. Our attorneys can guide you through the process of forming and properly setting up a legally-compliant, open or closed end, digital-asset investment fund so you can begin raising capital that can be employed into your fund's strategy. 

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