Ropes & Gray represents many leading fund sponsor and investment management firms in all aspects of their businesses. We assist in the organization and offering of hedge fund products in the United States and in non-U.S. jurisdictions using a variety of structures and vehicles. Our advice encompasses product design, tax planning, regulatory compliance, and trading issues. We also advise clients in connection with establishing and operating fund sponsors and investment managers.

In 2009, our investment funds practice earned the Chambers USA Award for Excellence, an award that recognizes the preeminent investment funds practice in the United States.

Practice Focus Areas

Fund Formation and Operation

• Selection of the appropriate legal structure and domicile for the fund;
• Development of efficient portfolio management structures, including master-feeder, side-by-side, umbrella, series, and hybrid funds;
• Structuring of fund performance-based compensation arrangements;
• Advice on business term alternatives;
• Development of offering memoranda, partnership and operating agreements, subscription documents, compliance manuals, review of sales materials and negotiations with seed or other key investors;
• Preparation and negotiation of service provider agreements, including advisory, prime brokerage, administration, custodial, and placement agent agreements;
• Portfolio trading issues;
• Exchange listings;
• Usage of electronic media, including the internet and social networking media;
• General advice on day-to–day activities;
• Compliance with federal, state and non-U.S. laws and regulations; and
• Monitoring of proposed regulatory reforms.

Fund Sponsors and Managers

We represent some of the largest hedge fund managers, nationally and internationally, as well as many smaller and start-up managers. Our representation encompasses:

• Development of optimal structures for fund sponsors and managers based on their specific objectives;
• Preparation of partnership and operating agreements addressing issues including profit and loss allocation, control, vesting, estate planning, employment and succession matters, separation, and other issues that may arise over the life of the business;
• Preparation of advisory agreements and structuring of performance compensation agreements;
• Development of structures for employee participation in profit sharing arrangements;
• Advice on registration with the Securities and Exchange Commission (SEC), state securities commissions and the Commodity Futures Trading Commission, and on exemptions from registration requirements;
• Development of compliance policies, procedures and training programs covering topics including codes of ethics, soft dollars, trade allocation, proxy voting, privacy policies, and safeguarding of information;
• Compliance with anti-money laundering requirements;
• Advice on trademark and other intellectual property issues;
• Preparation of employment agreements, including advice on non-competition, non-solicitation and other restrictive covenants;
• Advice on marketing issues; and
• Compliance with ERISA prohibited transactions and exemptions.

Fund-of-Funds

We represent numerous fund-of-funds and their managers, including some of the largest fund sponsors that operate a variety of multi-strategy and single strategy funds with many managers. In addition to the services noted above, we represent these clients in areas of particular concern to fund-of-fund managers such as:

• Structuring hybrid funds of hedge and private equity funds;
• Registration of funds of hedge funds under the Investment Company Act of 1940;
• Structuring multiple levels of ERISA compliant investment funds;
• Due diligence reviews of potential third party funds for investments and their managers;
• Review and negotiation of investment fund documentation; and
• Preparation and negotiation of side letter agreements.

Derivatives and Futures

Ropes & Gray represents numerous large and sophisticated endowments, hedge funds, mutual funds, managed futures funds, investment advisers, and commodity trading advisors which utilize over-the-counter and exchange-traded derivatives to implement a variety of complex investment strategies. We have approximately 20 lawyers who spend a substantial portion of their time assisting clients with respect to derivatives and futures matters, including:

• Over-the-counter transactions such as swaps, options, forward contracts, repurchase agreements/reverse repurchase agreements, market-access transactions, structured notes, and other structured products;
• Exchange-traded transactions, such as futures contracts and exchange-traded options;
• Organization of, and ongoing advice to, commodity pool operators and commodity trading advisors;
• Structuring, formation, documentation, marketing arrangements, and ongoing operations of commodity pools and managed account programs;
• Currency overlay programs and other currency management and hedging programs;
• Domestic and foreign prime brokerage programs including so-called “enhanced” prime brokerage programs and term agreements;
• Securities lending programs including programs in which our clients lend securities directly to counterparties, and lending programs offered by custodial providers or third-party lending agents; and
• Tax treatment of derivatives and futures transactions.

We are experienced in negotiating the terms of all key industry documents such as the ISDA Master Agreement, the IFEMA Master Agreement, the FEOMA Master Agreement, the Master Repurchase Agreement, the Global Master Repurchase Agreement, the Master Securities Loan Agreement, and the Global Master Securities Lending Agreement. In fact, many of the provisions we developed for our clients, tailoring master documentation to their needs, have been adopted over the years by the derivatives community as the industry standard.

Taxation

Our tax lawyers are on the cutting edge of all aspects of the federal income taxation of hedge funds and their advisers. Our practice in this area is comprehensive, covering all tax issues relating to a fund's organization, tax-efficient portfolio strategies, treaty issues arising out of non-U.S. investment and/or non-U.S. investors and fund reorganizations, and similar transactions. We also advise on issues more specific to fund advisers, such as mergers and acquisitions of the advisory entity, or tax efficient structures for the adviser's compensation.

ERISA

A substantial part of our Employee Benefits Practice Group focuses on investment fund and investment manager matters. We have an excellent working relationship with policymakers and other key people at the Department of Labor. With the substantial growth in pension assets, the consolidation of the financial services industry, and the rapid development of new products and services, investment managers face increasing challenges in dealing with a statute that is, in many cases, out of step with current market trends. Consequently, we are frequently called upon to apply creativity and insight as well as technical experience in order to find ways to bring products and services to market.

Mergers and Acquisitions

In addition to our regular representation of investment advisers, we have an active practice representing buyers and sellers of investment management businesses. Our lawyers have worked with several of the nation's leading asset management consolidators as well as medium-to-smaller-sized advisory firms in connection with merger and acquisition activities. We have advised our clients in acquiring and selling strategic minority interests in investment management businesses, including "seeding" transactions, and have participated in numerous "spinout" transactions in which a core set of investment professionals leaves a large institution to form their own investment management business. We provide guidance in all aspects of these transactions, including negotiating engagement letters with investment bankers, drafting term sheets, conducting due diligence, drafting and negotiating definitive legal documentation, structuring earnouts, designing employee compensation arrangements, and providing advice on obtaining client consents. As a result of this experience, we understand what it takes to get deals done successfully from the perspective of both buyers and sellers. Acquisition transactions in the investment management business are fast paced and complicated, and we have the experience to achieve timely, successful results for clients.

Bankruptcy and Business Restructuring

We have extensive experience representing clients in bankruptcy cases and distressed situations throughout the United States and in working with foreign insolvency professionals internationally. Our bankruptcy group works with clients to maximize their recovery in the event of a counterparty's insolvency or bankruptcy, such as filing claims in the SIPC proceedings for Lehman and its domestic and foreign affiliates. Our bankruptcy lawyers also develop legal and business strategies for clients seeking opportunities arising from a counterparty's insolvency, such as advising a leading hedge fund sponsor forming a fund for the purpose of acquiring claims filed in the Lehman bankruptcy. Our lawyers maintain a practical focus and combine backgrounds in both commercial litigation and transactional practice to provide our clients with advice founded on broad experience. We also have substantial experience in contentious litigation, inside and outside of the insolvency context, designed to protect clients' interests. Our significant national practice representing investment advisers and funds gives us substantial knowledge about sophisticated financial instruments and their treatment in distressed or insolvency situations, and about the complex financing and tax issues involved.

Securities Litigation and Government Enforcement

Few sectors of the economy are more highly regulated than the investment management industry, and at no other time in our nation’s history have securities enforcement matters been more publicized or of greater potential consequence to those involved. For years, Ropes & Gray has advised clients in connection with sensitive and complex SEC enforcement matters and the many collateral risks they pose. The firm also regularly represents clients in related grand jury investigations and criminal proceedings, as well as in matters before the NYSE, FINRA, and other self-regulatory organizations. In doing so, we bring to bear the insights, experiences and judgment borne of extended periods of government service and regular appearances before federal and state regulators and prosecutors in years since. Several of the firm’s lawyers are former federal prosecutors; others have served with the SEC, including its Division of Enforcement.

The depth and range of our enforcement practice is a product of decades spent advising funds and advisers on investment management matters, routine and otherwise. Our success in resolving sensitive regulatory and enforcement matters stems from our broad approach and firm-wide sense of teamwork in advising our clients. By integrating the views of our enforcement and investment management counselors from the outset, our clients frequently avoid undue regulatory scrutiny, litigation and other disputes—or have the best possible record for defending themselves in an investigation or action if one is brought. We also routinely assist clients in implementing governance and compliance programs designed to detect and deter conduct that might lead to regulatory scrutiny or enforcement proceedings.

Our Clients

Ropes & Gray represents a variety of U.S.-based hedge funds, fund-of-funds, fund sponsors and investment managers, ranging from start-up ventures to some of the nation's largest firms, with hundreds of billions of dollars under management. We also counsel non-U.S. investment firms and other financial institutions with respect to their U.S. activities and operations.

Contact

For further information on this area of practice, please contact:

Laurel FitzPatrick
Leigh Fraser
Deborah Monson
Joel Wattenbarger

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