Yesterday a commercial mortgage company applied to join C-Loans.com, purporting to be a hedge fund that makes bridge loans on commercial real estate. When we asked them to prove that they were a bona fide hedge fund, and not just a bunch of advance fee scammers, they got a little huffy.
Frustrated, I sent an email to my buddies on LinkedIn.com. The question I posed was the following: Are All Hedge Fund Guys Liars? Do Hedge Funds Actually Make Commercial Really Estate Loans?
One guy - a guy who I have known for years - replied that he had left the mortgage REIT for which he had worked for nine years - to start his own hedge fund four years ago. I am confident that his firm was a bona fide hedge fund making commercial real estate loans.
Other guys replied that they too had met a tons of scammers claiming to be hedge fund managers. These scammers were in fact just a bunch of liars who were just trying to steal application fees.
But the best response came form an old buddy named George Witherspoon:
"All hedge fund guys are not liars; but I do understand your frustration, because we (too have run across a lot of ) investors that stated they are a hedge fund or represent hedge funds as their funds advisor.
In my experience with hedge funds there are several methods to use to determine if the hedge fund or hedge fund manager is legitimate and are listed below:
1. Hedge Fund Directory - Barclays publishes a directory which list all legitimate hedge funds worldwide. The cost of the directory is about $1,100.00 when I purchased mine in 2009. They also publish an electronic version which is helpful in locating funds by investment types.
2. Most funds managers are registered and can be checked out on any of the following sites -
a. http://www.finra.org/Investors/ToolsCalculators/BrokerCheck Use this site to check registration of Managers to see if they are a registered Broker/Dealer. The Manager does not have to be a registered Broker/Dealer, but they should have a Prime Broker. Additionally, any fund with assets in excess of $25MM should be registered as an investment advisor with the SEC. This status can be checked using the same link above then click the link to the right side of the page. If the fund is not registered, then the management company must be registered. Some hedge fund manager get around the requirement by limiting the amount of investors in the fund.
b. If the fund or the manager is not registered with the SEC and or IARD then check with the NFA at http://www.nfa.futures.org for the fund or the manager being registered. If the fund the manager or the management company is not registered, then, in my opinion, the fund is not serious about their business.
c. If the fund is registered in the Cayman Islands, as so many are, to get around the US regulation, you have to check with the Monetary Authority at http://www.cimoney.com.ky. If the fund indicates they are a Cayman Island Fund, and it is not registered with the Monetary Authority, it is either a fraudulent fund or it is not properly set-up and my advice to you would be stir away. We have had several funds approach us from the Cayman's that were not legitimate.
3. You can also visit the following sites, they provide information on hedge funds although the listing on the sites are voluntary:
Hope this information helps. Let me know if I can be of further assistance.
Regards,
George Witherspoon
| Hedge funds indeed do make bridge loans on commercial real estate, typically from $2 million to $50 million, at rates and terms comparable to those of hard money lenders. If you need a commercial bridge loan, you can submit your bridge loan request to several hundred bridge lenders by using C-Loans.com. And C-Loans.com is free! You can also write to me directly, George Blackburne III (the old man), at george@blackburne.com. In the Subject line, please insert, "Hedge Fund Deal." |