From a Yahoo! News/Reuters "special report" on hedge fund manager John Paulson:
Paulson did much to open the doors. He made his funds - in most cases just the Advantage funds - available to wealthy customers of Wall Street brokerages and small investment advisory firms.
These distribution channels, or "platforms" in hedge-fund jargon, are a cheaper way for wealthy individual investors to access Paulson. The manager normally has a $10 million investment requirement. But for as little as $100,000, an investor with several million dollars in assets can put money into a Paulson fund through these brokerage firms.
An increasing number of hedge funds, like D.E. Shaw & Co., Israel Englander's Millennium Management and Daniel Loeb's Third Point, are available to wealthy clients of UBS, Morgan Stanley and Bank of America's Merrill Lynch. But few funds are on as many of these platforms as Paulson.
In the United States, wealthy individuals can also turn to smaller firms like Mount Yale Capital Group, Luminous Capital, Krusen Capital, Altegris Investments and CAIS Capital. In Europe, Paulson funds are sold through Lyxor and Deutsche Bank. In Australia and New Zealand, a small firm called Ashton Funds sells access to Paulson.
Why go though UBS, Morgan Stanley, and Merrill Lynch rather than accepting the funds directly from the investors? Partly it's because those firms already have the relationships with wealthy customers. But partly, too, this looks to be a way around a government regulation — the one limiting the number of partners in non-publicly traded companies to 500. This is the same reason Facebook was going to raise capital via a fund of Goldman Sachs clients, until Goldman limited it to foreigners. The rule was probably originally intended to help consumers and investors by making it more difficult for them to invest in private companies that are regulated less extensively by the government than public companies. But in reality, the rule can wind up hurting investors and consumers, because now, if they want to invest with John Paulson, instead of doing so directly, they also have to pay some fee on top to UBS, Morgan Stanley, or Merrill Lynch, who aren't even managing their money.