Emerging markets investor LeapFrog hired Frances Holliday as general counsel a month ago. pfm caught up with her to discuss the legal challenges of working in emerging markets.
You are a month into the job. What are your priorities?
Healthcare and financial services — are increasingly regulated and so my focus will be on understanding the legal framework around those sectors in emerging markets. As an example we’ve just made an investment in ARM Pensions in Nigeria, and there will be a good amount of ongoing work supporting that particular investment.
We talk about emerging markets as a catch-all, but are there differences from a legal perspective between these markets?
While there are differences between emerging markets, they are united under one framework, in that they tend to be quite challenging places in which to work from a legal and regulatory perspective. A common characteristic is that these frameworks are not as sophisticated or developed. That said, there are historic, cultural and legal differences between countries. For example, in Africa there is a difference between the Francophone and Anglophone countries. The Cote d’Ivoire is quite different to Nigeria, for example. But there are also historic reasons where you might see similarities with legal structures in developed markets, for example, in Kenya with English law.
How do you use local lawyers?
We are extremely well-supported by local counsel throughout the regions and tailor each project accordingly. Each transaction turns on its own set of facts and circumstances. If you are doing a transaction in a different sector but the same geography you might switch local counsel to ensure you get the best advice. In London or the US or developed markets more generally, counsels have extensive experience across sectors and often able to draw on those experiences in making recommendations. This is not as common in emerging markets, but we don’t see it as having any raised or increased risk to the transaction.
General counsels tell me that limited partner demands have ramped up in recent years. Is that your experience?
Yes, the environment has changed for general partner in terms of demands from LPs, especially in relation to risk management and corporate governance. But LeapFrog devotes considerable time to deep-screening every transaction to ensure our reports to LPs are as full and complete and thorough as they can be. And this isn’t something we just do at the point of investment but through the life of investment. This is a direct response to LP demands for more focus on due diligence.
Why do you think we have seen a rise in private funds hiring general counsel?
Ten years ago it was easier to invest in private equity and there was less scrutiny of the private funds industry. Returns were good and relatively easy to make and as the asset class has become more popular and the interest in the space has increased this has brought on more scrutiny. There has also been an increase in the complexity of transactions and products offered by managers, and this has required greater internal counsel resources. In the past it was quite rare for an asset management firm to have a general counsel and it was considered something banks did, but now it is increasingly important for private funds to have in-house counsel.
What do you see as the key role of a general counsel?
A general counsel is there specifically to support the business. That means ensuring — whether on the LP side or on the portfolio side — that the legal framework is robust and responds to the needs of the business at the time. How you get there is by ensuring the team around you are also bought into that approach and also that your external advisors are with you and the team. And the role of the general counsel is to lead the team.