Hedge Fund Side Letters With Seward & Kissel’s Kevin Neubauer

ValueWalk's Raul Panganiban interviews Kevin Neubauer, Associate at Seward & Kissel LLP.

Q3 2019 hedge fund letters, conferences and more

Interview with Kevin Neubauer


Hello podcast listeners today's very special episode with Kevin Neubauer. He's an associate at Seward & Kissel. He's also the lead author of the Seward & Kissel side letters study. Before Seward & Kissel, Kevin worked as an associate counsel at Providence Equity Partners. Kevin earned his bachelor's at Fairfield University and received his Juris Doctor at Boston College law school. I want to welcome Kevin to the show, and I want to welcome all our listeners to a very special episode.

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Welcome to ValueTalks with Raul.

All right, yeah, so just wanted to welcome our listeners to a special episode of Kevin Neubauer, Senior Associate at Seward & Kissel and lead author of the side letter study. And Kevin, welcome to the show.

Thanks for having me. Appreciate it.

All right. Yeah, I can just begin with your background. And what led you to law and specifically the investment side?

Sure, yeah. So you know, I went to law school in Boston and graduated in 2009. And during one of my summers in law school, I was an intern here at Seward and, you know, really liked the practice of investment management and hedge funds and private equity fund formation and like the people in the group and decided to try to get into the group when I came to the firm full time upon graduation. And it's, you know, it's worked out great. So we have a group of, you know, about 75 lawyers that focus on investment management and do fund formation and associated regulatory work. And it's the kind of practice that, you know, the more you do it, the more you learn, and the more interesting and rewarding it becomes. And I like I said, I've been doing it for about 10 years. And, and it's been great.

Very nice. And then, yes. So you're the lead author of the side letter study. And before we go into that can just provide a definition of what is a side letter?

Sure. So you know, when an investor invests in a hedge fund, you know, by default, it's subject to the fee in withdrawal and other terms that are set forth in the partnership agreement of the hedge fund, you know, but sometimes, an investor either has a specific concern that you know, you know, investing in the fund under the default terms doesn't really work for them, or perhaps, you know, for business reasons, given that they're making a significant investment in a fund, a fund is willing to make some accommodations for the investor. In other words, allowing them to invest in the fund on terms that are different from the terms that are generally offered to investors. So for example, you know, you if you have a really significant sized investor, maybe 50 or 100 million dollars investing into a hedge fund, the investment manager may decide that rather than charging the investor, you know, a one and a half percent management fee, they're going to charge the investor, a 1.25% management fee. And so the special terms like those would be contained in a separate agreement that's entered into between the fund the investment manager to the fund and the investor. That's called the side letters and so basically that the terms of the side letter, qualify the generally applicable terms that are found in the partnership agreement.


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