Understanding IBKR’s Hedge Fund Account Structure

Study Notes:

When a client begins the Hedge Fund process, they are first directed to the Hedge Fund Advisor (HFA) or Fund Manager (FM) account. This Fund Manager master account is typically in the name of the Investment Manager. The account number for the Fund Manager master account is denoted with the letter “F” followed by a series of numbers.

Once the HFA/FM is created, only then can they create the actual Hedge Fund (underneath the master HFA/FM account). The sub-Hedge Fund account number is denoted with the letter “U” followed by a series of numbers. 

It is important to understand the difference between the HFA/FM and the Hedge Fund itself. The master Fund Manager account cannot hold any positions itself, and instead it is used to trade on behalf of the sub-accounts underneath it. For example, if a large cash deposit was sent to the HFA/FM account, which is a separate entity from the Hedge Fund itself, it cannot be used for trading. In order to trade the deposited funds, the sub-Hedge fund itself should be funded directly.

This process of having a master Investment Manager account with the Hedge Fund account underneath ensures that all parties involved are verified by compliance. It also allows the Investment Manager to have multiple hedge fund accounts or add separately managed client accounts and manage all these accounts from a single login. Each sub-account is credit-managed separately, and trades can be block allocated across multiple or all accounts at once.

Additionally, the investment manager can create multiple tier accounts by adding Advisors, Proprietary Trading Group STL, and Multiple Hedge Fund master accounts to their account structure. Each Advisor, Proprietary Trading Group STL, and Multiple Hedge Fund master account holder can add client, sub- and hedge fund accounts as required. 

The Investment Manager master application can be initiated from the Interactive Brokers website by clicking the Open Account button, followed by Start Application. Once the Investment Manager application is completed, the sub-hedge fund account application can be initiated. However, the sub-Hedge fund account application will not be approved until the master Investment Manager application has been approved by compliance.

The next videos in this course will review navigating the Hedge Fund Portal, initiating applications for the sub accounts, reporting tools, connecting to a Fund Administrator, and more.

If you would like more information on the Hedge Fund account structure at Interactive Brokers, contact our institutional sales team to learn more.

Resources

Hedge Fund Welcome Center

Institutional Sales Contacts