Corporate Practice-Hedge Funds, Commodity Pools and Trading Groups

Hedge funds are similar to private equity and venture capital funds in many respects, and we are witnessing an increasing convergence between them. Both are lightly regulated, private pools of capital that invest in securities and compensate their promoters or managers with a share of the fund's profits. Traditionally, however, hedge funds invest in highly liquid assets and permit investors to enter, withdraw capital from or exit the fund easily, while private equity and venture capital funds invest primarily in illiquid assets such as early-stage companies and so investors are locked in for a longer term (typically not less than two years, if not for the term of the fund).

As with private equity and venture capital funds, our Corporate Practice Group represents hedge fund sponsors in a variety of matters including formation, fund administration, transactional, and regulatory matters. We assist such clients in creating the appropriate vehicles for hedge funds, including fund of funds and master-feeder structures. We also provide our clients with advice on issues such as carry terms and calculations, management fees, clawbacks, and disclosures to investors, among others. After formation, we advise our clients on a wide range of complex regulatory, tax, and other legal issues that affect funds, sponsors and investors, including issues arising under the Securities Act, Securities Exchange Act, the Investment Advisers Act and Investment Company Act, the rules of self-regulatory bodies, and state securities laws.

Commodity pools are similar to hedge funds with a major difference being that the underlying investment instruments are commodities contracts rather than securities. Our Corporate Practice Group represents a number of commodity pool operators trading and investing in a variety of commodities, including energy and interest rate futures. We represent commodity pool operators in connection with structuring, forming, documenting and offering interests in the pool they are sponsoring, as well as commodity trading advisers in connection with the preparation and negotiation of their advisory contracts. We also provide advice on a wide range of complex regulatory, tax, and other legal issues that affect pools, operators, advisors and investors, including issues arising under the Commodities Exchange Act and the Securities Act, the rules of self-regulatory bodies, and state laws.

Similarly, we represent clients who own or operate trading groups or firms which engage in active trading of both securities and commodities for their own account and the accounts of others. Our role with respect to these clients includes ensuring proper licensing and preparing and negotiating various trading and other agreements.

We also represent investors, including high net worth individuals and family offices, in connection with their investments in hedge funds and commodity pools and their engagement of traders and trading groups. We counsel such clients on market trends and have developed methods for efficiently analyzing and counseling such clients on issues surrounding these activities.