What is fund formation/investment funds?

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What is fund formation/investment funds?

Post by Anonymous User » Sun Jul 19, 2020 8:38 pm

Title says it all. I’ve seen a lot of posts for these fields and I’m wondering what people do on a daily basis. I’m wondering if it is an area I should consider lateraling into.

I know what these areas are, but I’d like to know about the daily routines.

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Re: What is fund formation/investment funds?

Post by UnfrozenCaveman » Mon Jul 20, 2020 12:49 pm

draft LPAs, PPMs, maintain document checklist, review sub docs, receive comment memos and side letter requests, draft side letters, advise on regulatory issues

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Re: What is fund formation/investment funds?

Post by Anonymous User » Mon Jul 20, 2020 2:58 pm

Anonymous User wrote:
Sun Jul 19, 2020 8:38 pm
Title says it all. I’ve seen a lot of posts for these fields and I’m wondering what people do on a daily basis. I’m wondering if it is an area I should consider lateraling into.

I know what these areas are, but I’d like to know about the daily routines.
Start here:

https://www.chambers-associate.com/prac ... management

https://www.chambers-associate.com/prac ... ried-frank

If you have more specific questions, happy to answer (anon b/c I work in this practice).

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Re: What is fund formation/investment funds?

Post by Lukky » Mon Jul 20, 2020 4:54 pm

I was curious about what kind of exits are available for this group. I know a lot of them go to a client firm (bank / PE firm), but have you seen anything else? Also, do you know anything at all about the lifestyle / compensation post-exit?

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Re: What is fund formation/investment funds?

Post by Anonymous User » Mon Jul 20, 2020 10:23 pm

Lukky wrote:
Mon Jul 20, 2020 4:54 pm
I was curious about what kind of exits are available for this group. I know a lot of them go to a client firm (bank / PE firm), but have you seen anything else? Also, do you know anything at all about the lifestyle / compensation post-exit?
A lot more narrow options for post-firm life, but if you're coming from one of the main players (K&E/Simpson/Debevoise), you'll have a very good shot at going in-house to some larger banks that do some asset management work (think JPM/Northern Trust/Citi) or directly to a PE sponsor. It's harder to get your more run of the mill AGC role since you won't have much experience with public company type issues. There's some commercial contracting work in these roles, but it's mostly reviewing placement agent agreements, some NDAs and, tangentially, dealing with some deal docs for compliance with the underlying operating agreements.

Lifestyle while you're at a firm is steadily busy - I honestly think someone in fund formation/asset management is likely to bill more hours than an M&A/Cap Markets/Finance attorney, but the hours will be very steady and there's *technically* less fire drills. You might never have to pull all nighters or work off limited sleep, but you could have 4 consecutive months of 220+ hours if you're at one of the busier practices.

Lifestyle post-law firm varies wildly between sponsors. Some pay pretty close to law firm compensation (and if you leave at a high enough level, you could end up investing in the funds themselves and/or getting some carried interest) but will have intense hours, others still pay relatively well (200k-ish for a mid-level) and are as close to a 9-5 as you'll find. This will really depend on market: NYC and SF will be higher pay/worse lifestyles, while other markets will take a hit on pay but be much more sustainable.

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Re: What is fund formation/investment funds?

Post by Lukky » Tue Jul 21, 2020 1:55 am

Thank you! That's incredibly helpful.

Just had one more question: I know that fund formation typically refers to private equity funds. I know that venture capital funds are technically also private equity, but they are usually structure differently (I've heard that they are a lot simpler than traditional private equity funds, but obviously can't verify). Do you ever come across venture capital funds in your line of work? Do you know how it compares to traditional PE?

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Re: What is fund formation/investment funds?

Post by Anonymous User » Tue Jul 21, 2020 5:10 am

You don't draft PPMs per se, in-house counsel and the fund do it and you do the verification exercise and review on it. The PPM is the marketing document for the fund. You're then feeding through that information from the term sheet in the PPM into the LPA and other transaction documents. You're thinking about fund structures, fund economics (how the distribution waterfall works - i.e. how everyone gets paid). You're thinking about investment restrictions e.g. if the fund is known for its track record in x country, why would investors be comfortable with the fund investing in x. You're thinking about side letters - a Saudi investor might want to be excused from investments in alcohol. It's difficult to understand at first sight, but it's not that hard once you penetrate the surface of it.

It's high value transactional work, it's commercial, international. Everyone has an M&A team, funds is a little more exclusive. You need to know reg and it's both transactional and advisory. The exit opportunities in funds are pretty much the best of any practice area. Yes, they are funds. But they also pay really well. You can work at funds where you're beasted, but there are funds where you can make what you do in biglaw but pulling a 9-6 and no weekends. There's also the opportunity to get a little more involved on the business side in-house. M&A is known for exit opportunities but sometimes if you're a jack of all trades, you're a master of none and not all in-house opportunities pay well - unless you go to a super big corporate.

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Re: What is fund formation/investment funds?

Post by Anonymous User » Tue Jul 21, 2020 6:04 am

On your last q, firms mostly do PE; hedge funds and VC are structured similarly and the terms will be broadly the same.

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Re: What is fund formation/investment funds?

Post by Anonymous User » Tue Jul 21, 2020 9:48 am

Lukky wrote:
Tue Jul 21, 2020 1:55 am
Thank you! That's incredibly helpful.

Just had one more question: I know that fund formation typically refers to private equity funds. I know that venture capital funds are technically also private equity, but they are usually structure differently (I've heard that they are a lot simpler than traditional private equity funds, but obviously can't verify). Do you ever come across venture capital funds in your line of work? Do you know how it compares to traditional PE?
The work involved with launching a VC fund vs. a PE fund vs. a hedge fund is not terribly different (you're still going to be dealing with the same securities and regulatory issues, looking at the same type of documents and negotiations will generally look similar), but in reality there are different firms which have a different focus. Sidley, for example, does a lot of hedge fund work, but not as much PE work. Goodwin focuses on VC work.

A bigger difference is whether you're representing investors vs. representing sponsors or whether you're working on closed-end funds vs. open-end funds (as the mechanics are different, though not terribly so where you can't do both).

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UnfrozenCaveman

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Re: What is fund formation/investment funds?

Post by UnfrozenCaveman » Tue Jul 21, 2020 12:00 pm

VC funds are similar to PE funds. The two have sort of evolved from a different place, but concepts are largely the same. Some hedge funds have really simple documents.

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Re: What is fund formation/investment funds?

Post by Anonymous User » Tue Jul 21, 2020 12:14 pm

Do you travel a lot internationally? Looking for a practice group where i don't sit in the same office all the time.

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Re: What is fund formation/investment funds?

Post by The Lsat Airbender » Tue Jul 21, 2020 1:02 pm

Anonymous User wrote:
Tue Jul 21, 2020 12:14 pm
Do you travel a lot internationally? Looking for a practice group where i don't sit in the same office all the time.
it's hard to overstate how not-actually-desirable it is to travel a lot (i.e. have clients in different time zones) in biglaw

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Re: What is fund formation/investment funds?

Post by WhiteCollarBlueShirt » Tue Jul 21, 2020 1:18 pm

The Lsat Airbender wrote:
Tue Jul 21, 2020 1:02 pm
Anonymous User wrote:
Tue Jul 21, 2020 12:14 pm
Do you travel a lot internationally? Looking for a practice group where i don't sit in the same office all the time.
it's hard to overstate how not-actually-desirable it is to travel a lot (i.e. have clients in different time zones) in biglaw
Seconded, as it's the worst. Also, the answer is 'No'. Generally, there is little to no travel in funds (or any other corporate group). I've traveled for three reasons and never internationally, biz dev (to see out-of-state clients), to go to the main office and to assist with onsite due diligence for specific transactions (which is extremely rare for a biglaw lawyer to be doing). That said, a lot of firms will let lawyers visit other offices if they want to (but that's often on your own dime, only partially subsidized or to show face at the main office if you're in a satellite).

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Re: What is fund formation/investment funds?

Post by Anonymous User » Tue Jul 21, 2020 8:08 pm

Can anyone speak more about the exit opportunities? Is the SEC/CFTC an option? What about other non-financial regulatory biglaw practices? Thanks

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Re: What is fund formation/investment funds?

Post by Anonymous User » Wed Jul 22, 2020 2:15 pm

Anonymous User wrote:
Tue Jul 21, 2020 8:08 pm
Can anyone speak more about the exit opportunities? Is the SEC/CFTC an option? What about other non-financial regulatory biglaw practices? Thanks
I'm a midlevel funds associate at a non-elite (i.e. not Kirkland, Simpson etc.) funds group so I'll chime in with my 2 cents. My understanding of those firms comes secondhand from speaking with people at those firms.

At the mega funds groups like Kirkland and Simpson and Latham and maybe others, they will split up the funds group (and for firms like these, funds is almost entirely PE or other closed-end vehicles) into funds transactional and funds regulatory. Funds transactional will focus on the formation of the funds (I'll describe below) and funds regulatory will advise on compliance/fiduciary issues, assist with regulatory exams, and opine on fund docs (i.e. disclosures and other risk factors that should be added).

Fund formation is pretty much what others have described, forming entities, drafting LPA's and PPM's and sub docs, etc. One thing to note, the bigger the client, the more repetitive the work will be. If you're working on the 9th version of a blackstone fund, you're going to be duplicating fund VIII and changing names and random things that might've changed since the last fund launch. This will likely be the majority of your time if you're at a place like Simpson (though I defer to others actually working at those places if I'm wrong). Kirkland's client base is very middle market-y so that's not necessarily the case for Kirkland.

The more middle market-y, the more unusual/atypical/different/"interesting" each fund will be and you actually have to think. In my experience, it's shocking what a lot of these middle market funds do and how off-market they want to be.

For hedge fund practices, in theory it's the same documents and same formation/regulatory issues but the focus is entirely different. Hedge fund work is generally mechanically simpler on the transactional side but more regulatory focused. Not to say every hedge fund lawyer is a good regulatory lawyer (many aren't in my experience) but it's hard to be good without having a decent base of regulatory knowledge, whereas I've seen big name PE funds partners who don't understand the regulatory side at all. This may change over time as the SEC has gotten more focused on PE the last 5+ years. As one data point, I know some firms like Proskauer explicitly split up the PE funds and hedge funds practice groups. Personally, I think as an associate it's great to do both PE and hedge funds work (double the exit options, and mixes up your day and keeps things more interesting) but I tend to think a generalist like that wouldn't be as good at PE than a funds associate who only does PE, or vice versa with hedge funds. Reputationally, you don't see any big name partners who claim to specialize in both.

As for exit options, SEC is possible as they do have a private funds unit. Obviously a focus on regulatory issues would help make you marketable for that. You can also become a compliance examiner for the SEC, though that is non-legal and lower paying (although still valuable work, as you can end up either as a CCO/AGC type afterwards).

Last thing to note, with respect to exit options, I'm not at one of the big firms so I don't know how it is for them but I do get spam from recruiters for in-house roles all the time. I've never taken an interview so I can't speak to if I would actually get a job, so that that for what it's worth. But one thing I want to reiterate and highlight, the smaller the funds group you go to the more generalist you become (i.e. both PE and hedge funds, both transactional and regulatory). Also, you get way more responsibility early and, in my opinion, you probably become good so much earlier. Biases aside, I've met some third years at some of the big firms who were honestly shockingly incompetent, whereas I as a second year more than capably handled multi-billion dollar fund closings as the sole associate. In many ways I would think that helps give you a leg up when interviewing but I'm only speculating, I've never interviewed for an in-house role.

Let me know if any other questions.

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Re: What is fund formation/investment funds?

Post by UnfrozenCaveman » Wed Jul 22, 2020 2:44 pm

Anonymous User wrote:
Wed Jul 22, 2020 2:15 pm
Anonymous User wrote:
Tue Jul 21, 2020 8:08 pm
Can anyone speak more about the exit opportunities? Is the SEC/CFTC an option? What about other non-financial regulatory biglaw practices? Thanks
I'm a midlevel funds associate at a non-elite (i.e. not Kirkland, Simpson etc.) funds group so I'll chime in with my 2 cents. My understanding of those firms comes secondhand from speaking with people at those firms.
[+] Spoiler
At the mega funds groups like Kirkland and Simpson and Latham and maybe others, they will split up the funds group (and for firms like these, funds is almost entirely PE or other closed-end vehicles) into funds transactional and funds regulatory. Funds transactional will focus on the formation of the funds (I'll describe below) and funds regulatory will advise on compliance/fiduciary issues, assist with regulatory exams, and opine on fund docs (i.e. disclosures and other risk factors that should be added).

Fund formation is pretty much what others have described, forming entities, drafting LPA's and PPM's and sub docs, etc. One thing to note, the bigger the client, the more repetitive the work will be. If you're working on the 9th version of a blackstone fund, you're going to be duplicating fund VIII and changing names and random things that might've changed since the last fund launch. This will likely be the majority of your time if you're at a place like Simpson (though I defer to others actually working at those places if I'm wrong). Kirkland's client base is very middle market-y so that's not necessarily the case for Kirkland.

The more middle market-y, the more unusual/atypical/different/"interesting" each fund will be and you actually have to think. In my experience, it's shocking what a lot of these middle market funds do and how off-market they want to be.

For hedge fund practices, in theory it's the same documents and same formation/regulatory issues but the focus is entirely different. Hedge fund work is generally mechanically simpler on the transactional side but more regulatory focused. Not to say every hedge fund lawyer is a good regulatory lawyer (many aren't in my experience) but it's hard to be good without having a decent base of regulatory knowledge, whereas I've seen big name PE funds partners who don't understand the regulatory side at all. This may change over time as the SEC has gotten more focused on PE the last 5+ years. As one data point, I know some firms like Proskauer explicitly split up the PE funds and hedge funds practice groups. Personally, I think as an associate it's great to do both PE and hedge funds work (double the exit options, and mixes up your day and keeps things more interesting) but I tend to think a generalist like that wouldn't be as good at PE than a funds associate who only does PE, or vice versa with hedge funds. Reputationally, you don't see any big name partners who claim to specialize in both.

As for exit options, SEC is possible as they do have a private funds unit. Obviously a focus on regulatory issues would help make you marketable for that. You can also become a compliance examiner for the SEC, though that is non-legal and lower paying (although still valuable work, as you can end up either as a CCO/AGC type afterwards).

Last thing to note, with respect to exit options, I'm not at one of the big firms so I don't know how it is for them but I do get spam from recruiters for in-house roles all the time. I've never taken an interview so I can't speak to if I would actually get a job, so that that for what it's worth. But one thing I want to reiterate and highlight, the smaller the funds group you go to the more generalist you become (i.e. both PE and hedge funds, both transactional and regulatory). Also, you get way more responsibility early and, in my opinion, you probably become good so much earlier. Biases aside, I've met some third years at some of the big firms who were honestly shockingly incompetent, whereas I as a second year more than capably handled multi-billion dollar fund closings as the sole associate. In many ways I would think that helps give you a leg up when interviewing but I'm only speculating, I've never interviewed for an in-house role.

Let me know if any other questions.
This is pretty much right/accurate.

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Re: What is fund formation/investment funds?

Post by SamuelDanforth » Thu Jul 23, 2020 1:53 pm

My question is more focused on VC in-house roles, but it seems like PE might have a similar dynamic. Anecdotally, many GC/AGC lawyers at major VC firms appear to have come from M&A or other general corporate backgrounds, rather than VC fund formation practices. Do fund formation associates mainly target compliance or other "internal fund formation" type roles, or are there opportunities to land in AGC or legal counsel roles?

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Re: What is fund formation/investment funds?

Post by FluidMosaic » Sun Jul 26, 2020 10:28 am

Also - you want to be on the LP side if possible.

Significantly better lifestyle in my opinion due to not having to work for PE folks who have higher turnarouns time expectations.

I know some investment funds practices who have fire drills 24/7 during side letter negotiations due to short turnarounds required by their sponsors/partners.

Caveat that alot of LP negotiation is now done in house depending on LP size.

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