The management company of the hedge fund is responsible for investment decisions and administration, which can be thought of as everything else besides investment decisions.

Administration includes the handling of money and securities, marketing, accounting, etc. The management company could either take care of administration themselves or choose to outsource it to another company.

If the hedge fund is domestically based, than most of the administrative work is also done domestically to reinforce the legal basis of being a domestic hedge fund.

U.S hedge fund managers tend to create offshore hedge funds for avoid paying taxes so it is important to convince the IRS that your hedge fund indeed qualifies as an offshore hedge fund.

By following some legal guidelines, it is possible to administer within the U.S. and will qualify as an offshore hedge fund. This is called "safe harbor". Lucky for you, the U.S. Treasury provided the so-called "10 Commandments" for ensuring that your U.S. administered hedge fund still qualifies as offshore.

To summarize the 10 Commandments, the following must be conducted, maintained, or originated from outside the U.S.

• Formal communication with investors.
• Communications with the general public.
• Investment solicitation.
• Accepting and processing investments.
• Corporate records and accounting.
• Audit.
• Disbursements.
• The publishing of net asset per share.
• Board and shareholders' meetings.
• Investment redemption.