Due Diligence Corner - June 2013 Publication

 

Orical LLP has reviewed hundreds of offering documents of hedge funds and private equity funds across the jurisdictional and strategy spectrum in an effort to provide due diligence counsel to our clients. As a result, we believe we are uniquely qualified to provide analysis regarding the prevailing offering terms of private funds as well as on any trends or developments in the industry. In our Client Updates, we hope to provide you with an example of a development within the private fund industry that we have observed from our recent due diligence efforts.

 

As a greater number of newly-launched private fund managers have aligned themselves with “more established” managers or financial firms via seeding arrangements, etc., managers and investors alike should be cognizant of an adviser’s allocation and insider trading policy between the clients of a newly launched manager and those of the more established firm. In light of the SEC’s greater focus on insider trading actions, any policies and procedures that have been adopted to address these concerns may prove significant for managers and investors alike.

 

Specific due diligence questions in this regard may include: Are individual employees of the two firms prohibited from sharing material non-public information with one another? Are these employees physically separated or do they have restricted physical access from one other while discharging their investment duties? Do the two firms maintain a joint Restricted List or have they at any time?

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