Welcome To The Tax Intelligence Report!
The March
2008 issue of the Tax Intelligence Report profiles the tax career of A.J. Haas,
Managing Director of Hedge Counts, LLP. A.J. Haas founded Hedge Counts, LLP
which provides tax, accounting and administrative services to hedge funds, funds
of funds, venture capital funds and other private equity funds. It is a
privilege to have the opportunity to profile A.J. Haas because of my own
personal experience of working with him; he is an enormously talented tax
advisor who is proactive, efficient, accurate and demonstrates the highest level
of professional integrity. We genuinely appreciate the time A.J. Haas has given
to share his perspective with our readers this month.
All the best,
Kathleen Jennings
Editor, The Tax Intelligence Report
Kathleen@etsearch.com
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A.J. Haas is Managing Director of Hedge Count, LLP. He has been involved in the hedge fund industry since 1997 and has more than fifteen years of experience in the field of tax and accounting. A.J. has thirteen years of national public accounting experience with firms such as Ernst & Young in the New York and San Francisco offices, Deloitte & Touche in the New York office and BDO Seidman in the New York office. Prior to forming Hedge Count, LLP, A.J. Haas was the Director of a consulting firm tax department in San Diego, CA. where he was in charge of providing a variety of accounting, tax compliance and tax consulting services to clients in a wide range of services. Prior to his Director role, A.J. Haas was a Senior Tax Manager and Leader of
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the Global Asset Management Tax Consulting practice for Ernst & Young in the San Francisco, CA office where he was responsible for providing consulting services to more than three hundred hedge funds, venture capital funds and other private equity funds. In addition, A.J. was responsible for supporting the Global Asset Management practice tax compliance department at Ernst & Young.
A.J. Haas conducts in-house seminars and has spoken about international tax topics affecting hedge funds as well as delivering presentations on various financial product and private investment fund issues, including partnership allocations, collar transactions, management company issues, master-feeder structures, passive foreign investment companies, foreign withholding as well as pension plan issues.
A.J. Haas earned his Juris Doctorate degree from Rutgers Law School in Camden, New Jersey, a Bachelors of Science degree in Business Administration at Fordham University in New York, New York and an LLM in Taxation from the University of San Diego, San Diego, CA. A.J. Haas is a Certified Public Accountant in the states of New York and California and is also a member of the New York State Bar, the American Bar Association and the California Society of Certified Public Accountants.
KJ: As Managing Director of a hedge fund administration firm, please describe what a hedge fund does for investors?
AH: A hedge fund is generally organized as a limited partnership in which sophisticated investors pool money together for the purpose of investing and trading in stocks and securities. The hedge fund is normally run by the general partner or hedge fund manager. The hedge fund manager invests and trades the fund’s assets to seek either long-term capital appreciation or to catch the short-term swings in the market. In return for these services, the hedge fund manager generally receives compensation in the form of a management fee and an incentive fee.
KJ: How did you get started in your hedge fund tax career and what attracted you to this particular area?
AH: I have always enjoyed working with the stock market and investing in securities. My hedge fund career started at the accounting firm of BDO Seidman. During college, I accepted an internship with the financial services group of BDO Seidman’s New York City office that specialized in hedge funds. It was during this time that I realized my interest in working with hedge fund clients.
KJ: What are the primary tax issues facing hedge fund managers today?
AH: Congress is considering new legislation that would significantly change the way hedge fund managers are taxed. Currently, hedge fund managers receive an incentive allocation, most of which could be taxed at the lower long-term capital gains rate of 15%. There is renewed discussion in Congress about converting what we call the “carried interest” from capital gain to ordinary income. Such a change would subject hedge fund managers to a much larger tax burden.
KJ: What is carried interest?
AH: The term carried interest is generally used to describe the incentive allocation or compensation that the hedge fund manager receives for managing the hedge fund.
KJ: Are you aware of any significant, impending changes in the tax law that would impact hedge fund managers?
AH: I am not aware of significant, impending changes in the tax law at this point. The changes will largely depend on the upcoming elections and which political party occupies the White House. The changes will also depend on the economic conditions of the country, as well as the health of the stock market.
KJ: How do investors benefit from investing in hedge funds?
AH: Unlike mutual funds and other structured products, the hedge fund vehicle is much more flexible. The hedge fund can not only invest in long positions in stocks, but can also enter into short positions in stocks, invest in options, currencies, futures, distressed debt securities, and other derivative-type investments. Because of this flexibility, many industry experts argue that hedge funds have the ability to be more diversified, perform better in bear markets, and generate superior returns over the long term.
KJ: Do you typically see hedge funds that specialized in a certain areas?
AH: Yes. Hedge funds can have many different strategies. For example, some hedge funds specialize in distressed debt, some specialize in emerging or frontier markets, some invest in small cap stocks, while others may invest in long and short equities; it really depends on the fund. There are a wide variety of investment strategies for funds to utilize.
KJ: What source would one use to track hedge funds that are high performers and ones that may not be high performers?
AH: There are several hedge fund databases that track hedge fund returns. These databases are primarily private database services. Hedge fund managers cannot market their fund under SEC Regulations. Therefore, if one is interested in investing in a hedge fund, he/she may need to contact the hedge fund manager directly to request an offering circular.
KJ: Would hedge fund investors be institutional investors as well as individual investors?
AH: Yes. There are many institutional investors in the market, including endowments, pension plans, and fund of funds. In addition, many high net worth individuals invest in hedge funds.
KJ: What trends do you see in the hedge fund industry?
AH: I expect the hedge fund industry to continue to grow, especially in Asia. Many new hedge funds are forming in Japan, Singapore, as well as other Asian countries.
KJ: A.J., thank you for taking the time to answer our questions. Your perspective is valuable to the Tax Intelligence Report readers around the world and we genuinely appreciate the time you gave to share your experiences.
Kathleen Jennings (KJ)
Editor, The Tax Intelligence Report
Kathleen@etsearch.com
A.J. Haas, J.D., CPA, LL.M. (AH)
Managing Director of HedgeCount, LLC
Carlsbad, CA.
ahaas@hedgecount.com
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