A hedge fund’s performance history, or track record, can be one of its most valuable assets. A fund that has developed a successful track record will want to promote that track record as evidence of its own capabilities and protect that track record from being claimed or distorted by others. On the other hand, a portfolio manager or other employee who has developed a successful track record will want to take that track record with him when he leaves the fund and use it to attract his own investors. A fund or portfolio manager with a poor track record may want to avoid or limit the disclosure of past performance. In a guest article, Sean R. O’Brien and Sara A. Welch, Managing Partner and Counsel, respectively, at O’Brien LLP, along with Joel A. Blanchet, a Partner at Kirkland & Ellis LLP, explore the manner in which the law affects investment funds, investment adviser firms and individuals when it comes to the portability of track records, and identify steps that funds and portfolio managers can take to protect their respective rights with respect to those track records. At the outset, this article discusses who owns an investment track record and therefore, who can use such a track record. The following sections detail regulatory guidance provided by the Securities and Exchange Commission (SEC), industry guidance provided by the CFA Institute and court decisions on the ownership and portability of track records. The article concludes with a discussion of contractual provisions hedge fund managers can use to protect their investment track records from misappropriation and misuse. For more on O’Brien LLP, see “Sean R. O’Brien Launches Boutique Law Firm Focused on Hedge Fund Litigation
,” below, in this issue of the Hedge Fund Law Report. For more by O’Brien LLP attorneys, see “Protecting Hedge Funds’ Trade Secrets: The Federal Government’s Enforcement of Criminal Laws Protecting Proprietary Trading Strategies
,” Hedge Fund Law Report, Vol. 3, No. 48 (Dec. 10, 2010).