The pan-Atlantic battle between US and UK law firms for hedge fund dominance, is being fought largely in London. US firms have followed the flow of US-based hedge fund managers into the UK and are now competing head to head with the traditional London legal elite, Dechert and Simmons & Simmons. “The US is 5 to 10 years ahead, in terms of technology for funds. It’s all US driven and we bring that expertise,” Daniel Shapiro of Schulte Roth & Zabel says. “The prime brokers said there would be work in London so we came over. European managers also raise their money in the US, so we decided to build on that offering.”
Schulte’s exalted position over in New York has proved a valuable entry card into the London hedge fund arena. The firm is now frequently invited to tender for the most prestigious fund mandates in London, and when beauty parades are called, Schulte tends to run up against Dechert and Simmons & Simmons for the prime instructions. “There aren’t many English law issues. The fund vehicle is generally under Cayman law, the administration might be in Dublin, the prime broker might be subject to English law, but you are basically deal counsel,” Shapiro says.
The way was paved for Schulte et al by Dechert in the 1990s, but this was down to the US firm acquiring an English law team. It essentially established its London office as the hub of the American firm’s hedge fund operations. “Doing UK/US one-stop-shop was then very novel: now it’s very accepted,” lead partner Peter Astleford observes.
With multitudes of New York-based hedge fund managers establishing themselves in London, their legal advisers are imitating their movements. In 2002, Akin Gump Strauss Hauer & Feld relocated New York funds partner David Billings to London and hired associate Simon Thomas from Dechert as a partner.“We’re smaller than the UK firms with two partners, although there will be three very shortly. Schulte has two partners, but relative to our size we have done very well. The market is very big and continuing to grow even with firms like Simmons & Simmons having established practices,” Billings says. “The primary reason we are here is that our clients are here. Our client base is predominantly US-based, but the industry is becoming global and the most successful European hedge funds are opening in the US. So the firms that are going to be successful are the ones that cover this industry on a global basis.” Certainly the London team has proved its worth. Now established clients of the firm, FRM, Polygon and BlueCrest were all originated in London. “We have followed our clients eastwards, but gone after local
clients also,” Billings adds.
Beyond Schulte and Akin Gump and of course the original US player in London, Dechert, their American colleagues have not shown such enthusiasm to break into the hedge fund sector’s second city. “We don’t really have a hedge fund practice in London, but we do have an FSA regulatory practice for our fund clients,” Sidley Austin Brown & Wood’s Bill Kerr says.
Though Kerr foresees a day when the firm will have a fully fledged hedge fund team in London, he believes it is not essential for global credibility. “Many people in the UK are forming offshore funds and we do that for UK managers, but just from our New York and Chicago offices. We have not opened in London yet, because this practice is so mobile. You can represent the manager clients from wherever you are in the world.”
Yet Sidley has recognised the value of having a hedge fund practice in Hong Kong through the hire of Effie Vasilopoulos from Johnson Stokes & Master. Certainly, US firms have not been prohibited from representing London based managers, by not being in the UK capital.
The pure fact that American investors are so influential in the hedge fund world means that US firms have an increasingly prominent role to play. Willkie Farr & Gallagher has provided US counsel to Gartmore on new fund launches, working alongside Simmons & Simmons in London. With UK firms such as Simmons & Simmons showing little or no signs of entering the New York market, it suggests that US law firms will hold the balance of power in the medium to long term. Yet Simmons & Simmons’ Iain Cullen believes that proliferation is not the key to world domination. “Hedge fund management is not a global business in the sense that they tend to operate out of one place,” he says. The signals from the hedge fund managers suggest this comment isn’t entirely accurate, but in an age where reputation and quality precedes global coverage and quantity, Cullen’s salient observation provides some judicious perspective. His firm’s continued strength in the London market backs up his assertion.
Schulte’s exalted position over in New York has proved a valuable entry card into the London hedge fund arena. The firm is now frequently invited to tender for the most prestigious fund mandates in London, and when beauty parades are called, Schulte tends to run up against Dechert and Simmons & Simmons for the prime instructions. “There aren’t many English law issues. The fund vehicle is generally under Cayman law, the administration might be in Dublin, the prime broker might be subject to English law, but you are basically deal counsel,” Shapiro says.
The way was paved for Schulte et al by Dechert in the 1990s, but this was down to the US firm acquiring an English law team. It essentially established its London office as the hub of the American firm’s hedge fund operations. “Doing UK/US one-stop-shop was then very novel: now it’s very accepted,” lead partner Peter Astleford observes.
With multitudes of New York-based hedge fund managers establishing themselves in London, their legal advisers are imitating their movements. In 2002, Akin Gump Strauss Hauer & Feld relocated New York funds partner David Billings to London and hired associate Simon Thomas from Dechert as a partner.“We’re smaller than the UK firms with two partners, although there will be three very shortly. Schulte has two partners, but relative to our size we have done very well. The market is very big and continuing to grow even with firms like Simmons & Simmons having established practices,” Billings says. “The primary reason we are here is that our clients are here. Our client base is predominantly US-based, but the industry is becoming global and the most successful European hedge funds are opening in the US. So the firms that are going to be successful are the ones that cover this industry on a global basis.” Certainly the London team has proved its worth. Now established clients of the firm, FRM, Polygon and BlueCrest were all originated in London. “We have followed our clients eastwards, but gone after local
clients also,” Billings adds.
Beyond Schulte and Akin Gump and of course the original US player in London, Dechert, their American colleagues have not shown such enthusiasm to break into the hedge fund sector’s second city. “We don’t really have a hedge fund practice in London, but we do have an FSA regulatory practice for our fund clients,” Sidley Austin Brown & Wood’s Bill Kerr says.
Though Kerr foresees a day when the firm will have a fully fledged hedge fund team in London, he believes it is not essential for global credibility. “Many people in the UK are forming offshore funds and we do that for UK managers, but just from our New York and Chicago offices. We have not opened in London yet, because this practice is so mobile. You can represent the manager clients from wherever you are in the world.”
Yet Sidley has recognised the value of having a hedge fund practice in Hong Kong through the hire of Effie Vasilopoulos from Johnson Stokes & Master. Certainly, US firms have not been prohibited from representing London based managers, by not being in the UK capital.
The pure fact that American investors are so influential in the hedge fund world means that US firms have an increasingly prominent role to play. Willkie Farr & Gallagher has provided US counsel to Gartmore on new fund launches, working alongside Simmons & Simmons in London. With UK firms such as Simmons & Simmons showing little or no signs of entering the New York market, it suggests that US law firms will hold the balance of power in the medium to long term. Yet Simmons & Simmons’ Iain Cullen believes that proliferation is not the key to world domination. “Hedge fund management is not a global business in the sense that they tend to operate out of one place,” he says. The signals from the hedge fund managers suggest this comment isn’t entirely accurate, but in an age where reputation and quality precedes global coverage and quantity, Cullen’s salient observation provides some judicious perspective. His firm’s continued strength in the London market backs up his assertion.
