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Hedge Fund Valuation Discounts & Wealth-Transfer Tax Minimization Opportunities


Thursday, November 5, 2009
Product Code - TMAU19
Speaker(s): David C. Jacobson, Esq., Law Offices of David C. Jacobson LLC, and Kyle B. Vataha, FMV Opinions, Inc.
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Agenda

During the market crisis of 2008, many hedge fund investors rushed to the exits.  Many fund managers raised gates to block the attempted redemptions to prevent a run on the fund.  Investors holding gated hedge fund investments have an unusual opportunity to transfer wealth to their children while minimizing transfer taxes.  With the potential for significant valuation discounts and the possibility of a rebound in returns, these individuals may be able to make lemonade out of lemons.  

This webinar, recorded on November 5, 2009, explores the valuation discounts available for hedge fund interests and how the discounts enhance wealth transfer strategies.

What is covered 

  • Sources of Illiquidity

 

    • Liquidity of Underlying Portfolio Investments
      • Differences Among Investment Strategies
      • Liquid Securities vs. “Side Pockets”

 

    • Transfer, Distribution and Redemption Policies
      • Non-Transferability
      • Reinvestment of Dividends and Sale Proceeds
      • Hard and Soft Lock-Ups
      • Scheduled Redemption Dates
      • Use of “Gates,” Liquidating Trusts, and Other Mechanisms

 

  • Valuation Discounts

 

    • Key Factors Impacting Valuation Discounts
      • Level of Control and Marketability of Underlying Investments
      • Distribution and Redemption Policies
      • Current Status and Recent Performance of Fund
      • Expected Time-to-Liquidity
      • Volatility and Risk
      • Valuation Policy and Practice

 

    • Empirical Data
      • Restricted Stock Transactions
      • Listed Private Equity Funds
      • Closed-End Mutual Funds
      • Secondary Market Trading in LP Interests

 

    • Expected Discount Ranges

 

    • Case Study

 

  • Wealth Transfer Planning

 

    • Grantor Retained Annuity Trust
    • Sale to Intentionally Defective Grantor Trust
    • Trustee as Accredited Investor
    • Gift Tax Return

 

Education Objectives   

 

Participants will learn:

How professional appraisers establish valuation discounts for hedge fund interests.

Wealth transfer tax minimization strategies that take advantage of valuation discounts in hedge fund interests.

 

Speakers

David C. Jacobson, Esq., Law Offices of David C. Jacobson LLC, and Kyle B. Vataha, FMV Opinions, Inc.

David C. Jacobson, Esq., Law Offices of David C. Jacobson LLC
David C. Jacobson has nearly two decades of experience in estate planning, taxation and tax-exempt organizations.

Prior to establishing the Law Offices of David C. Jacobson, LLC, he was a member of the estate planning team at UBS Private Wealth Management in Manhattan where he provided estate planning services exclusively to the firm's ultra-high net worth clients throughout the U.S.

He was previously a member of the wealth planning group and also trust counsel at Deutsche Bank Trust Company in Manhattan, and a trusts and estates attorney with the law firm of Carter, Ledyard & Milburn in Manhattan.

Mr. Jacobson lectures and writes frequently on estate planning topics.

Education

Georgetown University Law Center, LL.M. Taxation, Washington, DC, 1992

University of Miami School of Law, J.D., Coral Gables, Florida 1991

University of Oklahoma, B.A., Norman, Oklahoma, 1988
 

 

Kyle B. Vataha, FMV Opinions, Inc.  

Kyle B. Vataha is an Assistant Vice President in FMV Opinions’ Irvine, CA office. Mr. Vataha has more than five years of business and securities’ valuation experience in the context of transaction fairness, leveraged recapitalizations, litigation support, financial reporting, income tax, estate and gift tax, and employee stock ownership plan administration.  His industry experience spans financial services, traditional and alternative asset management, media and communications, technology, real estate, construction, manufacturing, retailing, distribution, and professional services.  Mr. Vataha has provided valuations of companies across all stages of development, and of various types of securities, including common and preferred equity, debt and convertible instruments, restricted securities, stock options and other derivative instruments, as well as a variety of structured interests within private equity, hedge fund, and real estate investment firms. 

 

Mr. Vataha leads FMV’s practice in the valuation of alternative asset management firms, including venture capital and private equity firms, hedge fund managers, and fund-of-funds managers.  Valuations in the alternative asset management industry have been performed in the context of transactions, litigation support, and estate and gift tax filings.  Mr. Vataha also supervises the research and development of the FMV Restricted Stock StudyTM, the largest and most widely-used restricted stock transaction database used for determining and supporting discounts for lack of marketability for illiquid securities.  He also manages FMV’s valuation practice regarding non-transferable equity stock options.