Don’t operate in a bubble

What makes a good private fund counsel and what should you look for in an external firm? Adveq’s in-house lawyers explain what is best practise at the firm which manages more than $6 billion of assets for pension funds, insurance companies, family offices and other financial institutions.

Would you describe yourself as a specialist or generalist, and has the firm’s preference shifted over time?

Atherton: I would describe myself as a specialist private investment funds lawyer. Prior to joining Adveq, I spent nine years as a funds lawyer in private practice, first at SJ Berwin then Proskauer Rose. At Adveq I advise the business on its legal structures and investments. As the business has grown, we have found having lawyers with both a specialist and a generalist background to be very helpful to us.

Aldag: Adveq has evolved as a business and grown, with transactions of increasing complexity and huge regulatory developments. Similar developments have taken place for our institutional client base, which has expanded and become more global. 

When I joined Adveq eight years ago I was the sole lawyer responsible for legal and compliance issues and I would refer to myself as a generalist lawyer. 

Adveq now has four legal officers and one compliance officer. The changes inside our legal team are a reflection of our increasing need for both specialist and generalist lawyers.

What do you look for when hiring in-house lawyers?

Atherton: If we look at our own in-house legal team, we have Stephanie who has the broad experience and corporate generalist expertise, we have a regulatory lawyer who has a deep understanding of the global requirements that we are subject to, and I was brought in with a specialist fund structuring and investment background. 

We have found that as we have grown, it has been really helpful for us to have individuals with each of these skillsets to be able to fully service the business.

How has a general counsel’s skillset had to develop over time?

Aldag: To meet the requirements of a growing and more complex global business as well as to fully satisfy the needs of our institutional clients, skillsets of general counsels have needed to adapt. A deep understanding of legal issues as well as a business mindset is needed more than ever.

Atherton: As an in-house general counsel you have to learn to understand how the business operates and what issues are outside of legal ones. 

When you move to an in-house role you are often asked to provide advice on topics that are not purely legal in nature and asked for your input on matters from a business perspective. This often requires you to think in a much broader context than when you are working as an external counsel.

What is expected of today’s in-house legal counsel?

Aldag: With the risk management team, a good in-house legal team should be weighing the business risks against the opportunities. When you engage outside counsel, you face the danger that they focus on the legal aspects and neglect the business needs or certain client relationship matters.

Atherton: If our investors have queries on our legal documentation or other aspects of our structures or investments, we can depend on the staff we have internally to answer queries, rather than being reliant on a third-party law firm that may not understand the other aspects of that investor’s business as well as we do. 

We recognize having an in-house legal team with a breadth of experience is something that our investors really value, and we view being able to provide this expertise as a part of our full-service offering.

Aldag: It is also helpful from a fee perspective to have people internally with this knowledge.

What legal work do you outsource?

Atherton: We outsource our fund investment due diligence work. It makes sense to have this work carried out by someone who reviews these types of investments on a daily basis. Given the number of investments that we make, having it performed in-house would not be an efficient use of our legal resources.

We have specialist teams we engage depending on the type and structure of the investment that we are making. They are fully briefed on the key issues of importance to our business and will consult our in-house legal team and the investment management lead on any issues that arise.

Aldag: In the same spirit, we will also engage external counsel to advise us on any complex new structural and/or cross-jurisdictional requirements that we are required to address.

Do you ask for any particular requirements from external law firms?

Atherton: The legal market has become very competitive and a counsel needs to do more to show that it has real value-add.

The law firms we engage are generally specialists in the private investment fund space, regulatory specialists who can assist us with new regulatory requirements relevant to our business, or specialists in the legal due diligence and execution of investments.

What attributes do you look for in outside legal specialists?

Atherton: We have a need for specialists, but we expect that any lawyer we instruct will have a solid understanding of general legal matters that are applicable to our business. For example, if we hire a fund structuring expert we would expect them to have a good working knowledge of the regulatory aspects that are relevant to our funds.

While lawyers can specialize in a particular area, they should not working in a bubble. A good general understanding of areas outside their specialism that might impact on investment management firms is very valuable.