Asset Management

Proskauer partner Josh Newville discussed the SEC’s focus on valuation of private fund investments at the recent Securities Enforcement Forum West 2020. The global COVID-19 crisis has added a layer of complexity to the valuation process, requiring special care. As we predicted in our 2020 Top Ten Regulatory and Litigation Risks for Private Funds, ongoing economic uncertainty will likely lead to increased scrutiny on fund managers’ valuation of privately-held portfolio companies from both the SEC and investors. At the recent securities enforcement conference, Josh addressed the following potential risks. In light of recent events surrounding tech unicorn…
We have seen the SEC increase its focus on valuation of privately-held portfolio companies recently. The SEC’s increased focus is in line with our predication made in the Top Ten Regulatory and Litigation Risks for Private Funds in 2020 post from the start of this year, and we expect the trend to continue. The global COVID-19 crisis has added a layer of complexity to the valuation process, which for illiquid assets can be challenging during even calm economic conditions. While some companies have benefited from the changes brought on by COVID-19, the overall market conditions resulting from the crisis have…
Shareholder rights plans, commonly known as “poison pills,” are arrangements that can be used by companies to stave off hostile takeovers or activist investors seeking to exert control over a company without paying a control premium. A typical rights plan, if triggered, would allow all shareholders except the triggering person to purchase additional shares in the company at a substantial discount. The resulting share dilution makes it significantly more expensive for the triggering person to purchase a controlling stake in the company. Because of this, it is extremely rare for a rights plan to be triggered; instead, rights plans can…
Originally posted March 31, 2020. Last updated August 26, 2020. In response to the novel coronavirus (COVID-19) pandemic, the Securities and Exchange Commission and its Staff have provided temporary regulatory relief and guidance to assist a variety of market participants. This document summarizes the SEC’s actions that affect public companies, registered investment companies and registered investment advisors. The SEC Staff is monitoring developments closely and will consider additional relief and guidance from other regulatory requirements for those affected by the coronavirus as conditions warrant. We will update this summary as the SEC takes additional actions. The guide linked below should…
Many portfolio companies continue to confront business disruptions as a result of the COVID-19 pandemic. Even prior to the pandemic, we were seeing an uptick in litigation claims against sponsors and funds arising out of portfolio companies. The liquidity challenges since March have increased those risks at some companies. For sponsors, many of these risks arise from director positions and conflicts of interest, whether real or alleged. Below we provide tangible ways for fund sponsors to identify risks, educate their directors, and mitigate risk.…
The COVID-19 crisis has highlighted, in a dramatic way, the issues that a country may face if it loses control over certain strategic sectors of its economy to foreign interests. Like other countries in the world, France has had in place for many years a mechanism to screen foreign direct investments (”FDI”) in strategic sectors, but over the last year it has adopted legislation to markedly reinforce that mechanism, consistent with a global trend developing even before the COVID-19 pandemic. Foreign investors contemplating an investment in France should expect an environment of stricter scrutiny of proposed transactions from the perspective…
With more people working remotely than ever before in light of COVID-19, firms in the private equity and hedge fund space should review their Regulation S-P privacy and information-safeguarding policies to ensure they are compliant and ready for a prolonged period of remote work. In particular, in view of SEC guidance, firms should focus on several key areas including personal devices and personally identifiable information.…
The COVID-19 pandemic has created significant challenges, as well as significant opportunities for both hedge fund managers and investors. Hedge fund managers are launching new funds and attracting new investor capital, seeking to capitalize on investment opportunities arising in a dislocated market. How has the world changed, and what advice can be given to new or existing managers trying to launch a new hedge fund or raise new capital in this environment? Read on for practical considerations on launching a new fund. Download the full article here.
The ongoing COVID-19 crisis is presenting fund managers with numerous challenges. One key challenge is to make sure that their portfolio companies have sufficient capital available to weather this particular storm. But how can fund managers ensure the liquidity required by their funds and portfolio companies is available? Proskauer’s leading Private Investment Funds team examines the ‘recycling’ options available in the market and outlines the main considerations fund managers should keep in mind when considering liquidity options. Fund recycling explained When fund managers find their portfolios in need of additional funding they can seek financing from multiple sources of alternative…
A new and unprecedented investment environment has been created during the current COVID emergency as every state that has price gouging laws on its books has activated them, and states without official statues are regulating prices by executive order or existing consumer protection and unfair trade practice laws. Never before have price controls been active across the entire United States, and for such a lengthy period of time, requiring fund managers to consider the risks of price gouging enforcement and assess portfolio investments in light of key attributes of price gouging statues. In this article, we review these potential risks…
Further to our last update on prospective changes to the UK insolvency regime in light of COVID-19, the UK government revealed the Corporate Insolvency and Governance Bill on 20 May. The Bill follows the lead of several other jurisdictions including the Netherlands, Hong Kong, Spain, Australia and Germany in introducing such emergency measures and includes perhaps some of the most significant reforms to the UK insolvency regime since The Enterprise Act 2002. The Bill introduces a number of both temporary and permanent changes as follows: Temporary changes  Wrongful Trading: wrongful trading sanctions are temporarily suspended from 1 March to 30…
The unprecedented level of uncertainty caused by COVID-19 is expected to trigger portfolio company and fund level liquidity issues as fund sponsors grapple with  unexpected need for additional capital in segments of their portfolios, whether due to stalled public markets, lack of available credit,  or otherwise.  In addition, we expect segments within the limited partner (“LP”) community will seek sources for liquidity due to decreased realization events and declining public markets, while we expect others (particularly secondary funds, preferred equity providers and other asset managers) will view the current disruption as an attractive opportunity to put available capital to work.…
Private fund managers are facing market disruption as a result of COVID-19 – volatile valuations, liquidity concerns and fundraising challenges are just some of the myriad issues. Eventually, as the current environment calms, private fund managers will navigate next steps. Built to serve asset managers, Proskauer’s Private Funds Group offers a series of cross-border insights to help chart the course forward. Explore Proskauer’s insights on tomorrow’s complex business challenges: Guide to “Recycling” Options for Fund Managers Preferred Equity: Flexible Financing Solutions A Guide to GP-Led Solutions COVID-19: Are Clawbacks Around the Corner? Considerations for Private Fund Managers to Weather the
On 14 May 2020, the UK Financial Conduct Authority (“FCA”) published its final guidance for insurance and premium finance firms, in relation to the fair treatment of customers who are in temporary financial difficulty resulting from the current COVID-19 pandemic. The guidance and associated rules subsequently came into effect on 18 May 2020 and will be reviewed within 3 months of the same in light of any further developments around the current circumstances. Firms for which this guidance is relevant include the following: insurers; insurance intermediaries (including appointed representatives); premium finance lenders that provide credit to fund the payment of…
Originally published on April 8, 2020. Updated as of May 20, 2020. In an effort to halt the spread of the novel coronavirus Covid-19 (“Covid-19”), on March 14, 2020 the French government mandated a shut-down of non-essential businesses and other venues open to the public. The shut-down ended on May 11, 2020. Among the businesses concerned were retail stores, shopping centers, and restaurants. Businesses were authorized to continue their online activities and related deliveries. The shut-down did not impact businesses that are considered “essential to the life of the nation”, such as food shops, drugstores, banks, and gas stations (the…
We at The Capital Commitment blog have previously discussed several steps for fund managers and others to weather the storm brought by COVID-19.  One of those steps is assessing the likelihood of a carried interest return obligation under a fund agreement’s general partner clawback provision (and planning for how to mitigate those obligations, if necessary).  A recent article from our colleagues in Proskauer’s Private Funds group highlights the important role that general partner clawbacks play in ensuring the economic deal between a fund manager and the fund’s limited partners is protected, regardless of how market disruptions, such as those…