Opalesque Exclusive: Transfers of wealth through low valued and illiquid hedge funds present opportunities for tax efficiency

Alternative Market Briefing

Opalesque Exclusive: Transfers of wealth through low valued and illiquid hedge funds present opportunities for tax efficiency - Pluris Valuation

Monday, December 14, 2009

From Kirsten Bischoff, Opalesque New York:

As holiday gift lists are being drawn up, the remaining 16 days of 2009 offer hedge fund investors and managers opportunities to transfer hedge fund shares to family members for what can be substantial tax benefits. In 2009 these transfers take on special significance because so many hedge funds remain below value or gated. While both these situations are less than ideal from an investment perspective, they do create optimal windows for gifting shares to children and spouses at much lower tax rates than seen previously, or in the future as fund performance recovers.

“We’re hearing about many cases where people are making transfers of hedge fund interests right now,” Espen Robak, President at New York-based Pluris Valuation Advisors LLC told Opalesque. Robak, recently co-authored an article which goes into the technical details of “using deflated interests in hedge funds for tax-efficient transfers of wealth to heirs”.

Lower NAV advantages Transferring hedge fund shares that are currently devalued and that investors have expectations will participate in the market recovery offers a chance of gifting heirs future value taxed at today’s valuations.

Hedge fund managers are also presented with an opportunity to make transfers to heirs. “For intricate tax law reasons managers typically transfer a ve......................

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