Stradley Ronon’s nationally recognized Investment Management Group is unique in its ability to handle the many specific types of transactions and issues that fall under the formation and operation of private investment funds (hedge funds) and other alternative investment products. Our lawyers counsel institutional advisers, fund managers, banks and brokerage firms in the formation of private investment funds, as well as provide guidance on regulatory and compliance matters relating to the operation of these pooled investment vehicles. Our advice to hedge fund clients draws on our lawyers’ broad spectrum of experience in securities, commodities, business, tax and ERISA matters.
Stradley Ronon has substantial experience in establishing new hedge funds and fund-of-funds both in the United States and offshore. We provide a full range of legal services to hedge funds and their managers, including advice on structuring and operations, tax strategies, administration and regulation of hedge funds. We advise fund sponsors and fund managers on legal and regulatory requirements and exemptions under federal and state securities laws, the Investment Company Act of 1940, the Investment Advisors Act of 1940, the Commodity Exchange Act and the Employee Retirement Income Security Act (ERISA).
The hedge funds structured by Stradley Ronon invest in a variety of securities, commodities, swaps, options, futures, and collateralized debt obligations and structured finance products. We have extensive experience with both domestic hedge funds and offshore hedge funds that are domiciled in locations such as the Cayman Islands and Bermuda. These hedge funds include long/short equity funds, fixed-income funds and commodity pools.
Stradley Ronon’s Tax Practice Group has been involved in a number of offshore hedge fund transactions using low-tax jurisdictions that were designed for both U.S. and non-U.S. investors. Our tax lawyers assist clients in evaluating the repatriation of a number of functions prohibited in the United States prior to the repeal of the so-called “Ten Commandments.” This has included reviewing agreements with offshore service providers with a view towards consolidating a number of these activities in the United States. Our reviews have involved evaluations of the scope of investment activities that are permitted to occur in the United States under newly proposed rules, as well as examinations of the extent to which solicitation efforts can be made to non-U.S. investors without violating applicable tax and securities provisions.
Rounding out our service to clients is our emphasis on keeping them informed of the constantly evolving issues impacting hedge funds.
Private Equity Funds
We also represent numerous privately held entities that make various types of equity or debt investments in operating businesses. We handle several different models of these entities – the fund-of-funds model, which is a pool of private investor money managed by separate managers; and the classic private equity fund model, a pool of private investor money that invests in operating businesses and restricted securities. For these private equity funds, our lawyers draft formation, offering and acquisition materials and documents, including partnership and operating agreements (typically with performance fee clauses), investor questionnaires and subscription agreements. We address investment advisory, investment company, federal and state securities laws, ERISA and complex taxation issues that arise, and we manage all of the organizational, ongoing operational, private placement and governance issues that develop in the representation of these clients. Our lawyers also represent these entities in their funding and investment selection processes.
We represent various venture funds that are sponsored and run by venture capitalists to invest in companies in various stages of development. For such funds, our lawyers perform a full spectrum of services – from formation to strategies for investment in other companies. We structure and draft formation documents and draft offering and subscription materials for venture funds. In addition, we are well versed in addressing any issue involving investment company, investment advisory, federal and state securities laws, and ERISA. Stradley Ronon lawyers also act as corporate counsel to our venture fund clients in appropriate circumstances.
Structured Finance Products and Transactions
We handle transactions involving funds investing in various types of structured product and asset-backed securities (often called collateralized debt obligations (CDOs)). These transactions generally involve the representation of privately held entities that purchase pools of assets using an enhanced financial structure. Our alternative investment product lawyers assist in structuring the products or CDOs and drafting formation documents, offering documents and subscription materials. As with our work for other hedge fund clients, our lawyers handle investment company, investment advisory, and state and federal securities law issues that arise in the context of forming and operating a structured product.
We represent private investment partnerships that operate to trade commodity interests, such as treasury bills, foreign currency and stock indices. Not only do our lawyers draft formation and offering materials, but we also perform Commodities Futures Trading Commission compliance work, including registration of commodity pool operators and handling ongoing compliance issues.