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Hedge Fund Lawyers

The Job

Lawyers provide a wide range of legal services to hedge funds. One important task is helping to establish a new fund. Lawyers work closely with the managing partner to decide how to best structure it. They ask questions such as: Who can invest in the fund? How will it be marketed to investors? Will the agreed-upon structure be in compliance with applicable laws? Will the fund be set up as a general partnership with a limited liability company (LLC) as the general partner, or will two LLCs be set up, with one LLC acting as the manager of the other? After answering these and many other questions, it’s on to drafting an operating agreement, a limited partnership agreement, a private placement memorandum, and a subscription agreement, among other documents and steps. As you can see, there are countless things to consider when starting a hedge fund, and these steps need to be handled by a lawyer who is experienced in hedge fund law—especially because tens-of-millions of dollars are at stake if errors are made during the process.   

Job responsibilities for hedge fund lawyers vary by the size of the firm and other factors. A lawyer at a small hedge fund may have more compliance responsibilities and even hold the title of chief compliance officer in addition to serving as general counsel. Larger firms employ a higher number of lawyers (and usually have a separate compliance department). In this setting, lawyers often have more specialized duties based on their experience and expertise. Here are some typical duties of hedge fund lawyers:

  • Drafting and negotiating hedge fund documentation
  • Staying up to date with regulations created by the Securities & Exchange Commission and other regulating bodies
  • Responding to inquiries and enforcement actions by the SEC and the U.S. Department of Justice (including conducting internal investigations, responding to subpoenas for documents and testimony, and determining whether to litigate or settle enforcement actions)    
  • Drafting internal operating agreements and profit-sharing arrangements for partners
  • Representing hedge funds during legal proceedings
  • Analyzing legal and structural risks
  • Providing analysis and advocacy regarding complex derivatives and structures products
  • Assisting during the restructuring or wind-down of funds
  • Providing legal counsel regarding tax and general compliance issues
  • Providing legal vetting of new product offerings
  • Offering legal expertise regarding complex investment strategies (such as hybrid hedge fund/private equity funds)
  • Advising clients about laws such as the Securities Act of 1933, Securities Exchange Act of 1934, Commodity Exchange Act of 1936, Investment Advisers Act of 1940, Investment Company Act of 1940, Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010, and other national and state securities laws