As the hedge fund industry in Asia continues to adapt to the challenging environment brought on by the financial crisis, leading offshore law firm Walkers brought industry participants together with renowned experts to share insights and examine the current market landscape.
Held on June 2nd at the Mandarin Oriental in Hong Kong, 'Restructuring for Change' was a unique discussion on protecting and growing a hedge fund business in volatile market conditions. Hosted by Walkers' Hong Kong office, 'Restructuring for Change' was the latest in the series of 'Walkers Fundamentals' events, aimed at sharing knowledge and the views of some high profile guest speakers.
Joining Walkers for this special event and sharing their expertise were Steven Petersohn, executive director and senior portfolio manager of LIM Advisors Limited and Dong Tao, managing director and chief regional economist at Credit Suisse.
"We received an excellent response from the business community in Hong Kong to our first 'Fundamentals' event in Asia, which was most gratifying," said Hugh O'Loughlin, managing partner of Walkers' Hong Kong office. "After a period of such intense volatility in the hedge fund industry we have recently recognised considerable demand in Asia for information on the restructuring solutions and mechanisms to deal with distressed funds that our attorneys have been advising on globally for some time now."
With over 100 attendees, the conference room at the Mandarin Oriental was filled to capacity, with delegates keen to hear the guests' views on the economic and market outlook.
“Hedge funds have been forced to change. Many hedge funds produced positive returns because of leveraged beta and not alpha,” commented Steven Petersohn.
One of the real highlights of the afternoon was a lively and dynamic presentation by economist Dong Tao of Credit Suisse, where he examined China's economic outlook and the factors that meant China would play a pivotal role in the global economic recovery.
The seminar featured a number of presentations from Walkers' speakers on issues relating to distressed hedge funds and restructuring. Carol Hall and Denise Wong, both partners in the hedge funds group in Walkers' Hong Kong office, outlined some of the key tools that managers can adopt to deal with issues of illiquidity. Examining the practicalities of lock ups, redemption gates and side pockets, they also went through two case studies for delegates, looking at redemptions in specie, which simulates the mechanism of a side pocket and suspension provisions which can be effective when used in combination with a restructuring.
Scott Lennon, senior vice president with Walkers Fund Services, set out the director's perspective, noting that many of the issues currently being faced by Boards of Directors were simply not contemplated in the original fund documents, hence the redraftings and new language that are now being employed. Also changing are some of the demands on managers from large investors, Lennon said, with independent boards, independent pricing, quarterly reviews and changes in fees among the more common requests.
"Some of the structures we have outlined today do work but they can create difficulties when you have a large split between investor groups, which presents a challenge from a director and trustee point of view," Lennon said.
With illiquidity often the "death knell" for hedge funds, Guy Locke, senior partner of Walkers' Insolvency and Corporate Recovery Group, said the real issue that directors have to answer is whether the fund is solvent or insolvent and how the director's fiduciary duty is crystallised. Running through the various formal court-based proceedings available to funds in the Cayman Islands, Locke said that all too often directors have not dealt with illiquidity early enough, by using documents and suspending NAVs, allowing people to become creditors instead of shareholders.
Outlining the insolvency picture from a BVI law perspective, Fraser Hern, associate and restructuring specialist in Walkers' Hong Kong office, said that once a fund has been impacted by severe illiquidity resulting in the suspension of NAV calculation, an orderly wind down is required. Where illiquidity is less terminal, Hern said that tools such as distributions in kind or side pockets, can be used to allow the fund to continue as a going concern.
'Restructuring for Change' was the latest in the series of thought leadership events under the 'Walkers Fundamentals' banner, designed to be both informative and thought provoking, with the interactive nature of the seminar making for a lively exchange of views. The next 'Walkers Fundamentals' event is scheduled for New York towards the end of this year.
Held on June 2nd at the Mandarin Oriental in Hong Kong, 'Restructuring for Change' was a unique discussion on protecting and growing a hedge fund business in volatile market conditions. Hosted by Walkers' Hong Kong office, 'Restructuring for Change' was the latest in the series of 'Walkers Fundamentals' events, aimed at sharing knowledge and the views of some high profile guest speakers.
Joining Walkers for this special event and sharing their expertise were Steven Petersohn, executive director and senior portfolio manager of LIM Advisors Limited and Dong Tao, managing director and chief regional economist at Credit Suisse.
"We received an excellent response from the business community in Hong Kong to our first 'Fundamentals' event in Asia, which was most gratifying," said Hugh O'Loughlin, managing partner of Walkers' Hong Kong office. "After a period of such intense volatility in the hedge fund industry we have recently recognised considerable demand in Asia for information on the restructuring solutions and mechanisms to deal with distressed funds that our attorneys have been advising on globally for some time now."
With over 100 attendees, the conference room at the Mandarin Oriental was filled to capacity, with delegates keen to hear the guests' views on the economic and market outlook.
“Hedge funds have been forced to change. Many hedge funds produced positive returns because of leveraged beta and not alpha,” commented Steven Petersohn.
One of the real highlights of the afternoon was a lively and dynamic presentation by economist Dong Tao of Credit Suisse, where he examined China's economic outlook and the factors that meant China would play a pivotal role in the global economic recovery.
The seminar featured a number of presentations from Walkers' speakers on issues relating to distressed hedge funds and restructuring. Carol Hall and Denise Wong, both partners in the hedge funds group in Walkers' Hong Kong office, outlined some of the key tools that managers can adopt to deal with issues of illiquidity. Examining the practicalities of lock ups, redemption gates and side pockets, they also went through two case studies for delegates, looking at redemptions in specie, which simulates the mechanism of a side pocket and suspension provisions which can be effective when used in combination with a restructuring.
Scott Lennon, senior vice president with Walkers Fund Services, set out the director's perspective, noting that many of the issues currently being faced by Boards of Directors were simply not contemplated in the original fund documents, hence the redraftings and new language that are now being employed. Also changing are some of the demands on managers from large investors, Lennon said, with independent boards, independent pricing, quarterly reviews and changes in fees among the more common requests.
"Some of the structures we have outlined today do work but they can create difficulties when you have a large split between investor groups, which presents a challenge from a director and trustee point of view," Lennon said.
With illiquidity often the "death knell" for hedge funds, Guy Locke, senior partner of Walkers' Insolvency and Corporate Recovery Group, said the real issue that directors have to answer is whether the fund is solvent or insolvent and how the director's fiduciary duty is crystallised. Running through the various formal court-based proceedings available to funds in the Cayman Islands, Locke said that all too often directors have not dealt with illiquidity early enough, by using documents and suspending NAVs, allowing people to become creditors instead of shareholders.
Outlining the insolvency picture from a BVI law perspective, Fraser Hern, associate and restructuring specialist in Walkers' Hong Kong office, said that once a fund has been impacted by severe illiquidity resulting in the suspension of NAV calculation, an orderly wind down is required. Where illiquidity is less terminal, Hern said that tools such as distributions in kind or side pockets, can be used to allow the fund to continue as a going concern.
'Restructuring for Change' was the latest in the series of thought leadership events under the 'Walkers Fundamentals' banner, designed to be both informative and thought provoking, with the interactive nature of the seminar making for a lively exchange of views. The next 'Walkers Fundamentals' event is scheduled for New York towards the end of this year.
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