Hedge Funds

Overview

We represent hedge funds and fund managers throughout the entire fund life cycle. Our market leading Hedge Funds practice has been internationally recognized by the International Financial Law Review 1000 (IFLR1000), the Legal 500, Chambers & Partners and Asialaw Profiles. We have been advising hedge funds and their managers on Hong Kong requirements for over 15 years. Our clients have ranged from start-ups to bulge bracket investment managers with over US$60 billion of assets under management.

In our Hedge Funds practice, we advise clients on how to set up a hedge fund, how to operate a hedge fund and other matters:

  • Fund formation – Selection of fund vehicle, fund structure and fund jurisdiction and preparation of investment management agreements (“IMAs”)

  • Capital raising – Preparation and negotiation of private placement memoranda (“PPMs”), subscription agreements and side letters

  • Establishment of management group – Incorporation of manager, licensing applications to the Securities and Futures Commission (“SFC”) and preparation and negotiation of agreements between key principals, shareholder agreements, and share option schemes with key executives

  • Ongoing operational and regulatory issues

  • Fund restructuring

Our Hedge Fund practice is uniquely positioned to advise hedge funds and their managers:

  • Because our firm is heavily focused on financial services, including portfolio management, broking and dealing, financing, electronic trading and clearing, custody and derivatives trading, we bring a deep understanding of the full spectrum of the business activities that impact hedge funds.

  • At the same time, because we work routinely to assist clients on regulatory matters in Hong Kong, we understand the expectations of the SFC, the primary regulator of the Hong Kong securities and futures markets.

  • Finally, because we routinely represent clients in SFC investigations and prosecutions which test the limits of Hong Kong securities laws, we are fully conversant with the boundaries and complexities of the legal and regulatory framework under the Securities and Futures Ordinance (“SFO”).

Experience

Lead counsel to US based hedge fund manager with over US$4 billion of assets under management in respect of the establishment of Hong Kong operations

Lead counsel to PRC based asset manager with US$15 billion of assets under management in respect of SFC inspection

Lead counsel to hedge fund in successful appeal to the Hong Kong Court of Final Appeal in a precedent setting Hong Kong securities law case...

Lead counsel to activist short seller in precedent setting Market Misconduct Tribunal proceedings alleging market manipulation as a result of the...

Lead counsel to former portfolio manager in connection with dispute with former employer

Q&A

How We Can Help in Hedge Fund Formation

We set out below some of the common concerns our clients encounter in the set-up of hedge funds in Hong Kong and how we can help address those concerns.

We have a solid understanding of the licensing requirements under the SFO. We assess your proposed business activities and advise on whether you need an SFC license and if so, whether you need an SFC license for Type 9 (asset management) or an SFC license for Type 1 (dealing in securities).

We have advised hedge fund management groups on the possible availability of the intra-group exemption from Type 9 licensing and the possible use of the professional investors exemption (“PI Exemption”) from Type 1 licensing.

In addition, we can help assess whether the active marketing provisions of the SFO, which extend the SFC licensing requirements to certain conduct and activities outside Hong Kong, may apply to you if you are targeting Hong Kong investors.

We have extensive experience assisting hedge fund managers in applying for SFC licenses. Our clients benefit from our vast knowledge of the SFC licensing process accumulated over the years.

We have a thorough understanding of SFC licensing requirements, such as the “fit and proper” and competence tests. We are familiar with the various factors which the SFC will have regard to when assessing your SFC license application.

We evaluate your individual background and your proposed business activities to help you prepare an application to meet all the applicable regulatory requirements and improve your chance of success of being approved, whether as a licensed representative or as a responsible officer.

We actively help you pre-empt any potential concerns which the SFC may have and address any issues before they arise to ensure the greatest chance of a smooth and quick grant of the SFC license.

We help you think through how the hedge fund management group should be governed if there are 2 or more key partners or stakeholders in the group. We guide you through the decisions which you may need to make to avoid future disputes and to protect your interests in the event that your relationship with partners or key stakeholders deteriorates. We can review or prepare investment agreements by which seed investors take a stake in the management group or by which you and one or more partners agree to work together to launch the fund.

We have extensive experience advising on the types of issues which you may face in these situations including as regards voting rights, the distribution of profits, deadlock in decision making, restrictive covenants and the “ownership” of investors in the event of a subsequent breakup of the partnership.

Awards

Chambers and Partners

Financial Services Regulatory

Leading Practice

Chambers and Partners

Financial Services Regulatory

Leading Individual

Chambers and Partners

Financial Services Regulatory

Leading Lawyer

Chambers and Partners

Financial Services Regulatory

Well Regarded Lawyer

Chambers and Partners

Investment Funds

Leading Practice

Chambers and Partners

Investment Funds

Leading Individual

Chambers and Partners

Investment Funds

Leading Lawyer

IFLR 1000

Financial Services Regulatory

"Positively Ranked"

IFLR 1000

Financial Services Regulatory

Highly Regarded Lawyer

IFLR 1000

Hedge Funds

Leading Practice

IFLR 1000

Hedge Funds

"Positively Ranked"

Legal 500

Financial Services Regulatory

Leading Individual

Legal 500

Financial Services Regulatory

“Recommended Practice”

Legal 500

Investment Funds

“Recommended Practice”

Asialaw Profiles

Corporate

Leading Practice

Asialaw Profiles

Corporate

"Recommended"

Asialaw Profiles

Financial Services Regulatory

Leading Practice

Asialaw Profiles

Financial Services Regulatory

Outstanding Practice

Asialaw Profiles

Financial Services Regulatory

Market Leading Lawyer

Asialaw Profiles

Financial Services Regulatory

Leading Lawyer

 

Insights

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