Fund Formation and Investment Management
Our Private Funds Group provides entrepreneurial, pragmatic and proactive advice to the Firm’s private funds clients. Our experience covers fund formation, deal execution, management structuring and regulatory advice across a broad range of fund classes, including buyout, venture capital, hedge, real estate, mezzanine, distressed and funds of funds.
Our practice was ranked by The Legal 500 United States 2014 and 2013 in the category “Investment Fund Formation and Management.” Our core business involves advising our clients on the following types of matters, among others:
- Private equity and hedge fund formations;
- Establishment and acquisition of alternative asset managers, and the ongoing management of their funds and separately managed accounts;
- Regulatory matters; and
- Investments in private funds, including the evaluation of fund documents for alternative investments.
Our practice is global in nature, and is based in New York and supported by experienced lawyers in the firm’s 11 other worldwide offices. Lawyers in our group collectively speak ten languages, providing special capabilities in support of our emerging markets clients. We are often asked to serve as international fund counsel to non-US sponsors seeking to raise capital around the world, and can provide comprehensive advice whether they seek to use structures that are innovative or within the “market.”
We provide our clients with US regulatory advice under the Investment Company Act, the Investment Advisers Act, the Commodity Exchange Act, ERISA, tax and broker-dealer/FINRA regulations. Chadbourne’s tax lawyers bring deep knowledge of, and experience in, the tax aspects of structuring multinational transactions and partnerships. We enhance this capability through extensive and long-standing relationships with top-tier local tax professionals around the world. Chadbourne is well versed in managing the needs of different kinds of private fund investors, including taxable, tax-exempt (both pension and endowment), non-US and sovereign entities. Our partners can creatively handle the complexities of unrelated business taxable income (UBTI), effectively connected income (ECI), Foreign Investment Real Property Tax Act (FIRPTA) and other tax-intensive issues.
In addition, our employee benefits partners have significant experience working with private funds to address the complex ERISA and VCOC matters relevant to sponsors and pension fund investors, as well as Section 409 issues for equity plans and employment-related agreements. Our private funds clients are supported by and work with Chadbourne’s other interdisciplinary practice groups, including:
- Our Project Finance group, which the Chambers Global Directory calls “arguably the preeminent US power group” and ranks in the handful of top-tier firms working in the market;
- Our Latin America group, which received across the board rankings in the 2012, 2013 and 2014 edition of Chambers Latin America and is the only international firm to score in all six ranking categories for international law firms with Latin America-wide practices (banking & finance, capital markets, corporate/M&A, insurance, international arbitration and projects); and
- Our Bankruptcy and Financial Restructuring group, which is recognized in Chambers USA 2013.
Private Equity Funds
Chadbourne has extensive experience working with sponsors to structure, launch, negotiate and close private funds across every fund class around the world. We offer clients a “one stop shop” that provides advice on a range of matters including fund formation, the establishment of general partners and investment advisers, regulatory matters, co-investment arrangements, and management-level issues (including compensation, carry allocations, admissions and departures, wealth management, investment adviser/broker-dealer matters, consulting arrangements and infrastructure).
A significant component of our practice also includes the representation of investors on their investments in private funds, including on the tax and regulatory aspects of fund investments. Our clients include corporations, family offices, US and non-US high net worth individuals, foundations and development finance institutions. As a result of the volume of private fund documents we review (as counsel to fund sponsors and fund investors), we have a broad overview of the market that allows us to assist our clients with negotiating the most favorable market terms and side letter arrangements for their particular situation. Our investor review work covers private equity funds, hedge funds and venture capital funds.
We provide our clients with advice that is both legal and practical. Current Chadbourne partners include a founding member of a buyout fund and a former senior officer of a multi-billion dollar, Europe-based hedge fund. As a result of our direct experience on the business side of the industry, we are in an excellent position to understand the market and creatively assist our clients in all aspects of fund development, from formation (including capital raising) to investment to exit.
Value-added services that we provide to our clients include:
- Introducing emerging management teams to significant capital sources;
- Notifying private fund buyers of investment opportunities from among our contacts and/or clients;
- Introducing potential investors to our private fund clients;
- Identifying placement agents for first-time funds;
- Organizing sector- and region-specific networking sessions to provide a forum for our clients to meet and mingle; and
- Providing access to senior and mezzanine lenders.
We regularly advise alternative asset managers and investment advisers on the formation of hedge funds and on related aspects of their businesses. This includes, among other things:
- Establishing a full spectrum of hedge fund products using a variety of hedge fund structures;
- Advising hedge fund managers on all their corporate, tax and regulatory needs;
- Creating disclosure and offering documents for hedge funds; and
- Representing institutional investors on their investments in hedge funds, including the evaluation of fund documents for alternative investments.
We have a proven record of achieving successful outcomes for our hedge fund clients. For example, in 2007 we represented GLG Partners, Inc. in a US$3.4 billion deal to access public markets through a reverse acquisition with Freedom Acquisition Holdings, Inc., a special purpose acquisition company (SPAC). The combined company began trading on the New York Stock Exchange under the ticker symbol “GLG.” It was one of the most significant deals ever completed by a SPAC and represented the first US listing by an alternative asset manager primarily focused on hedge funds.
Thereafter, in 2010, we represented New York Stock Exchange-listed GLG Partners, Inc. in a merger with London Stock Exchange-listed Man Group plc. The combined company had approximately US$51 billion of assets under management, and the trans-Atlantic merger of the two publicly-traded companies was one of the largest in history for alternative asset and hedge fund managers. The transaction involved a novel bifurcated structure whereby the GLG controlling stockholders received Man Group common stock in exchange for their shares of GLG Partners, and public stockholders of GLG Partners received cash in the merger. The deal received the “Deal Advisors” Award from The Hedge Fund Journal.
Investment Management and Compliance
We regularly counsel private funds, investment advisers, investment companies and separately managed accounts on structuring, organization, distribution and SEC regulatory issues, including responses to SEC examinations.
We regularly advise clients on the establishment and acquisition of new advisory businesses (including formation and registration with appropriate regulatory authorities), development of compliance policies and procedures, performing compliance reviews, representations of advisers in connection with SEC examinations, and counseling clients on compliance with the Dodd-Frank Act.
We provide ongoing regulatory advice with respect to, and innovative solutions to issues arising under, among others, the Investment Company Act, the Investment Advisers Act, the Commodity Exchange Act, ERISA, tax and broker-dealer/FINRA regulations. Our services include:
- Establishing new advisory business handling both corporate, tax and regulatory issues and including formation and registration with the appropriate regulatory authorities;
- Preparing regulatory documents such as Form ADV, Form PF and SMA/wrap fee brochures;
- Developing compliance policies and procedures, as well as counseling advisers on the complete range of regulatory issues, including review of marketing materials, valuation of assets, principal and cross trades, codes of ethics, trade allocation, industry “best practices,” affiliated transactions and conflicts of interest and soft dollar arrangements;
- Assisting in annual compliance reviews under Rule 206(4)-7 under the Advisers Act and Rule 38a-1 under the Investment Company Act;
- Representing and counseling advisers during regulatory enforcement proceedings and examinations;
- Responding to regulatory requests and SEC deficiency letters;
- Performing mock SEC and compliance control examinations;
- Preparing CFTC/NFA commodity pool operator and commodity trading adviser registration or exemption filings;
- Advising on SEC advertising compliance, performance disclosure and marketing materials;
- Advising on and preparing regulatory filings (including Schedule 13F and 13D, and Form 13G) and blue sky compliance;
- Advising on the applicability of US federal and state securities laws to foreign investment advisers, and the applicability of foreign laws to US investment advisers; and
- Representing clients in connection with the full range of investment company industry products, compliance and activities, including all types of open-end and closed-end investment companies, funds of funds and funds of hedge funds.