For the purpose of managing the assets of persons residing outside of the United States, an offshore fund is ordinarily structured as a corporation and organized in a tax haven jurisdiction. Examples of such jurisdictions include Bermuda, British Virgin Islands, Cayman Islands, Ireland and Luxembourg. The jurisdiction in which the fund is organized often depends on the countries in which investors reside and the type of entity the sponsor desires to form. Offshore funds are also attractive to United States tax-exempt organizations (e.g., individual retirement accounts, qualified pension and profit-sharing trusts) as a method for avoiding unrelated business taxable income.

Often, the manager of an offshore fund forms a corporate entity to provide advisory services to the fund. This entity serves as the investment manager of the fund. If the hedge fund manager already manages the assets of a domestic partnership through a single corporate entity, the general partner of the partnership may also serve as the investment manager of the offshore fund. If the sponsor is managing the assets of a partnership through two corporate entities, the entity serving as the investment manager/management company of the domestic partnership will ordinarily serve as the investment manager to the fund.