A team of experienced and committed hedge fund lawyers plays a vital role in guiding hedge fund managers through their various responsibilities and helping managers avoid devastating mistakes.
Choosing the right legal team can mean the difference between an emerging hedge fund’s success or failure. A hedge fund attorney is usually the initial point of contact for startup fund managers. The hedge fund managers work closely with the attorney to develop the fund’s structure and terms, in light of the fund’s investment strategies.
Structuring the Fund
The hedge fund attorney advises the managers on applicable regulatory obligations, including required filings, examinations, and registrations. Once the fund’s terms and regulatory structure are defined, the hedge fund attorney will begin preparation of the fund’s offering documents (including the PPM, partnership agreement, subscription agreement, and certain regulatory filings).
Further, the hedge fund attorney will refer managers to other service providers, including administrators, prime brokers, and auditors.
Ongoing Legal Support
After the offering documents have been finalized, the hedge fund attorney will act as an ongoing resource and will assist the fund on an as-needed basis with legal and operational issues. Among the ongoing services that the hedge fund attorney will provide include the following:
- review marketing and promotional material;
- provide answers to investor questions;
- prepare amendments to fund offering documents as needed;
- prepare side letter agreements for strategic investors;
- answer structural and operational questions;
- assist managers with modifications to the fund; and
- advise managers on the eligibility of certain investors.
Choosing Legal Counsel
Choosing a hedge fund legal advisor is among the most important decisions that an emerging manager will face. Prospective fund managers should seek fund counsel with substantial knowledge of the hedge fund industry from both a regulatory and business perspective. It is also vital that the hedge fund attorney be committed to working directly with the fund manager through all aspects of the fund formation process.
In addition to experience, the cost of legal startup services is a key consideration when selecting counsel. Legal startup costs are typically borne by the fund and can cause a substantial drag on the fund’s reported performance. Choosing a reputable and experienced boutique law firm can help keep formation costs manageable and provide direct access to the firm’s partners.
