Law Firms - Onshore/Offshore Overview

   “The work tended to be a lot of fund formation and regulatory compliance,” Broadhurst explains. “A huge law firm wasn’t interested in a $50,000 one-off project. They wanted clients that were doing $50,000 a month.”

   As hedge funds have started needing more services — from advice with activism strategies to assistance with SEC registration to private equity transactions or succession issues — the business has become increasingly lucrative and spawned greater competition. Even huge global corporate law firms such as Skadden, Arps, Slate, Meagher & Flom, which has more than 1,750 attorneys, now have hedge fund practices. Although Skadden Arps doesn’t have the minimum number of client votes necessary to appear in our overall onshore law firm ranking, it is No. 4 among voters in the Hedge Fund 100, our list of the 100 biggest hedge fund firms in the world.

   Schulte Roth’s drop from No. 4 last year to No. 8 in the overall ranking may be in part a reflection of its success. The firm represents more than 1,500 hedge fund, private equity fund and offshore fund clients. “They are often extremely busy,” says Nancy Havens, founder and principal of Havens Advisors, a $220 million, New York–based, event-driven and merger-arbitrage hedge fund. Still, she adds that Schulte Roth has impressed her: “They always give me good advice; they have such vast experience.”

   This year we asked managers to separately rate offshore law firms, whose work still largely consists of fund formation or windups. When a hedge fund manager sets up a fund offshore — for tax and other purposes — its legal representative has to be licensed, and is typically domiciled, in that jurisdiction. About 70 percent of offshore hedge funds are registered in the Cayman Islands, according to its local lawyers and regulators.

   “The offshore framework works because it balances the needs of investors with those of the promoter and key service providers, the investment manager, administrator and auditor,” says Gary Linford, head of the investment and securities division of the Cayman Islands Monetary Authority.
Ogier wins the Alpha Award for top offshore law firm in a tight race with No. 2 Maples and Calder, which was No. 5 overall last year when onshore and offshore firms were ranked together. (Ogier didn’t meet the minimum vote count to be ranked last year.) Both firms’ hedge fund practices are headquartered on Grand Cayman Island. Maples finishes ahead of Ogier in client service and document preparation, two offshore law firm staples. But what clients most value from their legal counsel — both onshore and offshore — is hedge fund and regulatory expertise, and here Ogier excels.

   The story among offshore hedge fund law practices in recent years has been consolidation, starting in February 2004 when Jersey-based Ogier & Le Masurier merged with Cayman firm Boxalls. That acquisition set off a flurry of deals as firms rushed to gain practices in offshore hedge fund hubs such as Ireland, Bermuda and the British Virgin Islands.

   “The demand, particularly from institutional clients, is for multiple jurisdictions, and they want a law firm that can represent them in multiple places,” says Grant Stein, global managing partner with Cayman-based Walkers, No. 3 in our offshore firms ranking.

   The acquisition activity has created a “magic circle” of firms with specialist hedge fund practices, largely dominated by outfits headquartered in the Caymans, whose legal system, like those of most other offshore jurisdictions, is modeled on British law. In addition to legal advice, many offshore law firms offer administrative services and other functions, such as providing independent fund directors.

   “The reason Cayman has been stretching out in front of its competitors is because Cayman law firms have been so competitive with each other,” says James Bergstrom, who jointly heads the hedge fund practice at Ogier with Peter Cockhill.                    — I.R-S.