Schiff Hardin has a long history representing university and other endowment funds, nonprofits, insurance companies, pension plans, funds-of-funds and other institutional investors in connection with their investments in private funds, such as private equity, leveraged buyout, real estate, venture capital, SBIC, mezzanine, distressed and hedge funds.

As a firm of more than 350 attorneys in Chicago, New York, Washington, Atlanta, San Francisco and Boston, we are able to provide our clients comprehensive legal solutions on a national scale in the multitude of areas that affect their private fund investments. We are called upon to address all phases of the investment cycle including:

• Fund formation
• Initial investment and subsequent capital calls
• Operation of funds
• Exits
• Amendments of fund agreements and restructurings

We review and analyze our clients' proposed and existing investments in private funds with respect to all facets of the transaction. While we provide similar services to all of our institutional investor clients, our services vary to some extent depending upon the needs and concerns of each client. For all of our institutional investor clients, we the legal risks in the fund agreements in order for the clients to be able to take those risks into consideration when they are making business decisions regarding their investment. We have worked with many clients to develop particular investment platforms to address their economic and fund governance concerns. We then actively negotiate with fund sponsors and their counsel to conform the fund agreements as much as possible to these platforms before the clients make their investments.

Acknowledging that different institutional investors have different concerns that could lead to different priorities, we talk with our clients regarding their particular sensitivities. We also work with our clients to differentiate the importance of particular terms with respect to different classes of investment managers and types of investments. A particular client may in the case of an emerging manager, for example, place more importance on tightening the key person provisions and providing for an investor advisory board with greater oversight power than the same client would in the case of a more established brand name fund. Once the clients have invested in the funds, we advise them on issues that arise during the life of the funds. In every case, we strive to negotiate favorable yet fair terms for our clients.

Issues we frequently review and negotiate for our clients include:

• Legal structures and tax issues,
• Carry, compensation and expense reimbursement
• Distribution, waterfalls and liquidation rights
• Governance, voting and consent rights
• Valuation, financial reporting, inspection rights and transparency
• GP rights, obligations and exculpations
• LP rights and obligations
• Key person events, triggers and consequences
• Self-dealing and affiliate transactions
• GP and LP clawbacks
• Exits, cause termination and no-fault divorce
• GP removal
• Co-investing

We take a team approach to our representation and draw upon the expertise of our practice groups dedicated to the specialized needs of our clients including our nonprofit, securities, tax, ERISA, derivatives, finance and bankruptcy groups. In addition to providing cost efficiencies, this team approach allows us to bring particular legal and industry knowledge to our engagements.

We review a broad range of funds from first time venture capital funds being raised by emerging managers to well established name brand mega funds. Examples of funds on which we have recently worked for our clients include:

• A multi-billion dollar real estate fund that was raising its sixth fund
• A manager's second fund focused on private equity investments in Asia
• A leveraged buyout fund focused on minority owned businesses
• A hedge fund targeting distressed investments
• A multi-billion dollar fund focused on investments in the energy industry
• An emerging manager's first leveraged buyout fund focused on private equity investments in the Midwest
• A venture capital fund focused on "clean tech" industries

As a result of the breadth of our clients' investments in private funds, we see a wide variety of private fund investment agreements. This exposure gives us a deep understanding of market terms and allows us to identify frequent points of negotiation in private fund investment agreements and develop solutions to such issues. When the ILPA principles were released, we were not surprised by the positions that ILPA advocated on behalf of the limited partner community because many were the same positions we have been advocating for years.

Working with our clients over the last several years, we have been successful in negotiating economic and operational terms in private fund agreements that are more favorable to limited partners than those typically found in agreements for funds raised prior to the economic downturn. For example, we have frequently negotiated interim general partner drawbacks, concessions regarding transaction fees, general partner removal provisions and changes to distribution waterfalls. Overall, we believe that fund agreements should be structured to align the economic interests of the private fund sponsors and those of the investors.

We routinely face complex investment structures and difficult situations. Our approach involves a seamless integration of multiple practice areas. Our knowledge of market trends combined with the perspective of past practice gives us a unique ability to service our clients’ needs efficiently. We pride ourselves on a longstanding track record of total client satisfaction.