Selling equity for multi-tranche hedge fund collateralized fund obligations (CFOs) has proved to be quite a challenge, as competing firms race to find the structure that will allow investors to minimize potential significant tax liabilities.

Currently hedge fund CFO equity is virtually impossible to place in U.S. market, thanks to our friends at the Internal Revenue Service (IRS) and other regulators. In an all past transactions, CFO equity has been placed outside in the international markets, such as Man Glenwood and Investcorp's CFOs last summer, according to market sources. This is why finding an issuer with a strong European and Asian customer base is critical for underwriters. Issuers and underwriters are required to have strong distribution in private equity distribution, as and a sales force with ties to high net-worth individuals.

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