Oct. 2, 2014

Contractual Provisions That Matter in Litigation between a Fund Manager and an Investor

Certain provisions in limited partnership agreements and other agreements between fund managers and investors (Fund Documents) may seem perfunctory when those agreements are drafted, but they can become significant when a fund manager finds itself in litigation with an investor.  Those provisions concern, among other topics, arbitration, indemnification, advancement, integration, no-reliance, choice of law and choice of forum.  In a guest article, Thomas K. Cauley, Jr. and Courtney A. Rosen, both litigation partners at Sidley Austin LLP, and Ashley K. Martin, a litigation associate at Sidley, offer concrete strategies for hedge fund managers in thinking through the ramifications of each of these provisions when drafting Fund Documents.

All-Star Panel at RCA PracticeEdge Session Analyzes Five Key Regulatory Challenges Facing Hedge Fund Managers

A recent PracticeEdge session presented by the Regulatory Compliance Association (RCA) addressed five key regulatory issues facing hedge fund managers: Broker-dealer registration, the JOBS Act, alternative mutual funds, fiduciary duties and cybersecurity.  Matthew S. Eisenberg, a partner at Finn Dixon & Herling, moderated the discussion.  The speakers included Walter Zebrowski, principal of Hedgemony Partners and RCA Chairman; David W. Blass, at the time of the session, Chief Counsel and Associate Director of the SEC Division of Trading and Markets; Brendan Kalb, General Counsel of AQR Capital Management LLC; Scott D. Pomfret, Regulatory Counsel and Chief Compliance Officer of Highfields Capital Management LP; and D. Forest Wolfe, Chief Compliance Officer and General Counsel of Angelo, Gordon & Co.  As is customary, Blass offered his own opinions, not the official views of the SEC.  (Subsequent to the event, Blass was appointed general counsel of the Investment Company Institute.)  See also “How Can Hedge Fund Managers Structure Their In-House Marketing Activities to Avoid a Broker Registration Requirement? (Part Three of Three),” Hedge Fund Law Report, Vol. 6, No. 37 (Sep. 26, 2013); Part Two and Part One.

Happily Ever After? – Investment Funds that Live with ERISA, For Better and For Worse (Part Five of Five)

This is the final installment in our five-part serialization of a treatise chapter by Dechert LLP partner Andrew Oringer.  The chapter analyzes ERISA as it applies to private fund managers, references relevant authority and highlights critical compliance issues.  This article discusses trust requirements, custody, ERISA’s bonding rules, reporting of investments and direct filings with the Department of Labor, reporting issues (relating to compensation, hard-to-value assets and gifts and entertainment) and prime brokers.  The fourth article in this series addressed self-dealing issues relating to fee structures, certain special issues for plans of financial institutions, services for multiple funds, payment or reimbursement of expenses, employer securities and employer real property and certain miscellaneous exceptions (including foreign exchange and cross trading).  The third article focused on prohibited transactions, qualified professional asset managers, the “service provider” exemption and the exemption for compensation for services.  The second article covered fiduciary duty considerations, including delegation, allocation of investment opportunities, varied interests of fund investors, indemnification and insurance, investments in portfolio funds, enforcement-related matters and diversification requirements.  And the first article discussed the “plan assets” rules and rules for the delegation and allocation of fiduciary responsibility.

Top Ten GIPS Compliance Challenges for Hedge Fund Managers

The Global Investment Performance Standards (GIPS) are a set of best practices designed to ensure consistency in the presentation of investment performance results.  See “Expert Panel Provides Roadmap for Hedge Fund Managers Looking to Present Performance in Compliance with GIPS,” Hedge Fund Law Report, Vol. 6, No. 30 (Aug. 1, 2013).  Though theoretically voluntary, institutional investors often condition investments on, among other things, performance information presented in compliance with GIPS.  Accordingly, GIPS compliance is viewed by many as a de facto requirement for hedge fund managers seeking institutional capital.  See “Is GIPS Compliance and Verification Thereof a De Facto Requirement for Access by Hedge Fund Managers to Institutional Assets?,” Hedge Fund Law Report, Vol. 7, No. 29 (Aug. 1, 2014).  At the CFA Institute’s 2014 GIPS Standards Annual Conference, Karyn D. Vincent, a Managing Partner of ACA Performance Services, LLC, discussed the top ten GIPS compliance issues that she sees when acting as a GIPS verifier.  Jonathan A. Boersma, CFA, Executive Director of GIPS Standards at the CFA Institute, also participated in the discussion.  See also “A Step-By-Step Guide to GIPS Compliance for Hedge Fund Managers,” Hedge Fund Law Report, Vol. 4, No. 44 (Dec. 8, 2011).  This article summarizes Vincent’s top ten list, and identifies strategies for incorporating Vincent’s points into the marketing, reporting, disclosure and compliance efforts of hedge fund managers.

Sidley Partners Discuss Trends in Hedge Fund Seed Deals, Governance, Succession, Estate Planning and Tax Structuring (Part Two of Two)

This is the second article in a two-part series examining the more notable takeaways from the 2014 edition of Sidley Austin’s annual private funds event in New York City.  This article focuses on the discussion during a panel entitled, “Operating a Fund Manager: Opportunities and Pitfalls,” featuring Sidley partners Christian Brause, David R. Sawyier, Kathleen O’Hagan Scallan, Michael J. Schmidtberger and Daniel F. Spies.  The partners discussed capital markets as a source of liquidity for fund managers, evolving trends in seed deals, succession considerations, the challenges of business and personal divorces as they relate to structuring and succession, trust and estate considerations and fund- and management company-level tax developments.  The first article covered evolving fee structures, seed deal terms, single investor hedge funds, risk aggregators, expense allocations and co-investments, among other issues.

Industry Experts Discuss SEC’s Newly Adopted Revisions to Regulation AB

SEC Regulation AB governs the offering, reporting and disclosures relating to the sale of asset-backed securities.  On August 27, 2014, the SEC approved a set of sweeping changes to Regulation AB, commonly referred to as Regulation AB II.  A panel of industry experts recently discussed the key provisions of Regulation AB II.  The program was hosted by the Asset Securitization Report and sponsored by Bingham McCutchen, LLP.  Elliott M. Kass, of SourceMedia, moderated the discussion.  The speakers were Steven Glynn, a Vice President and Counsel at Barclays; Ryan O’Connor, a Director and Counsel of Citigroup Global Markets Inc.; Ian W. Sterling, an Executive Director and Assistant General Counsel of J.P. Morgan; John Arnholz, a Partner at Bingham; and Charles Sweet, a Managing Director at Bingham.  See also “CLO 2.0: How Can Hedge Fund Managers Navigate the Practical and Legal Challenges of Establishing and Managing Collateralized Loan Obligations? (Part Two of Two),” Hedge Fund Law Report, Vol. 6, No. 26 (Jun. 27, 2013).

Deloitte Strengthens Hedge Fund Practice with Two Key Appointments for the U.K. and EMEA

On September 26, 2014, Deloitte LLP announced two key appointments for the U.K. and EMEA regions to strengthen its hedge fund practice.

New Tax Partner at Ogier Luxembourg

Caroline Bormans joined Ogier’s Luxembourg office as a partner on September 15, 2014, the firm announced.  Bormans specializes in all tax matters related to investment funds.  See “What Should Hedge Fund Managers Understand About Transfer Pricing and How to Manage the Related Risks?,” Hedge Fund Law Report, Vol. 6, No. 42 (Nov. 1, 2013); “Tax Practitioners Discuss Taxation of Foreign Investments and Distressed Debt Investments at FRA/HFBOA Seminar (Part Three of Four),” Hedge Fund Law Report, Vol. 7, No. 4 (Jan. 30, 2014).


Anne-Marie Godfrey Joins Akin Gump in Hong Kong

Completing a series of announcements regarding the arrival of a group of partners, Akin Gump announced on September 29 that Anne-Marie Godfrey would be joining the firm’s Hong Kong office as a partner in the investment management practice.  She has extensive experience advising investment managers throughout Asia on the establishment and regulation of hedge funds, private equity funds and mutual funds. See “How Can U.S. Hedge Fund Managers Use Passport and Mutual Recognition Initiatives to Market to Investors in Asia?,” Hedge Fund Law Report, Vol. 7, No. 27 (Jul. 18, 2014).  For insight from Akin Gump, see “Akin Gump Partners Discuss Non-U.S. Enforcement, Insider Trading in Futures, Failure to Supervise Charges and Other Evolving Insider Trading Challenges for Hedge Fund Managers,” Hedge Fund Law Report, Vol. 6, No. 45 (Nov. 21, 2013); and “Akin Gump Partners Present Overview of Recent Developments in Fund Taxation, Fund Manager Transactions and Hedge and Private Equity Fund Investment Terms,” Hedge Fund Law Report, Vol. 6, No. 48 (Dec. 19, 2013).