Brexit

Following the recent result in the United Kingdom's EU referendum, Walkers has created a Brexit page dedicated to providing our clients relevant information about the jurisdictions in which we practise.

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Walkers Asset Recovery

Fifteen Walkers lawyers were recognised in the 2017 Who's Who Legal Asset Recovery guide. This is more than any other global law firm worldwide.

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Walkers Wins HFM Week Award

Walkers has been awarded the Best Offshore Law Firm Award for Client Service at the HFM Week US Hedge Fund Services Awards 2017.

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Walkers is a leading international law firm. We advise on the laws of Bermuda*, the British Virgin Islands, the Cayman Islands, Guernsey, Ireland and Jersey.
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Powerwomen 200

Walkers in IFC Powerwomen Top 200

Six Walkers lawyers have been ranked in the 2017 edition of CityWealth's IFC Powerwomen Top 200.

 

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Venture Capital, Tech and Start-ups – the Funding Frenzy in Asia

In recent years, Asia has seen a tremendous expansion in venture capital activity, with the aggregate value of venture capital deals in Asia reaching $67 billion, a staggering increase when compared to the 2013 figure of $11 billion. The latest, largest, history-making fund raised to date, SoftBank’s $93 billion Vision Fund, is like no other and proves that appetite in investing in tech and start-ups is continually growing.

It is interesting to note, however, that while the aggregate value of venture capital deals in Asia is increasing, Asia-based venture capital fundraising has been decreasing over the previous two years. Bain & Company, in its 2017 report on private equity and venture capital funds in Asia, noted that after allocating $115 billion to funds focused on the Asia-Pacific region over the previous two years, total funds raised in the region dropped almost 16% from a year earlier to $43 billion and slipped to 9% of the global total from 11% in 2015, which is unsurprising as results from the 2017 Bain Private Equity Survey indicate that general partners (“GPs”) sitting on a mountain of dry powder may not have been giving fund-raising their full attention during the year, prioritising instead the buying of companies and working on their existing portfolios. However, in the coming year, while deals and portfolio management will continue to be priorities, many GPs indicated in the 2017 Bain Private Equity Survey that they will be refocusing on fund-raising as well. Close to 70% said they will launch a new fund in the next 12 to 24 months.

In China and Southeast Asia, the investment in tech and start-ups is on the rise, with an emphasis on social media, payments, e-commerce, ride hailing apps, online travel or pure technology. The general sentiment is that opportunity for growth in the Southeast Asian markets remains high.

 

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Walkers (Jersey) Acts on the Launch of the Trinity House UK Commercial Property Fund

Walkers has acted as Jersey counsel to Trinity House Investments and Lighthouse Canton on the launch of Trinity House UK Commercial Property Fund 1 IC. Trinity House Investments is a UK-focused commercial property fund, structured as a Jersey Private Fund that will provide a platform for Singaporean capital, while Lighthouse Canton is a wealth advisory firm, regulated by the Monetary Authority of Singapore, providing Trinity House Investments with financial advisory services.

"Our appointment is another example of the growing interest of Asian investment managers in Jersey-fund vehicles for commercial real estate investment. It also highlights the rising global demand for the Jersey Private Fund product in general, which greatly reduces time to market and facilitates the deployment of capital.

Walkers, through its presence in Jersey, Guernsey, Hong Kong and Singapore and its global expertise in investment funds laws, is perfectly positioned to offer best-in-class legal services to the Asian investment fund market.

We are delighted to have aided Trinity House Investments and Lighthouse Canton in bringing the Trinity House UK Commercial Property Fund to market. We have seen that the speed and ease of the Jersey Private Fund has greatly facilitated Asian investment managers realise their strategic goals," commented Jonathan Heaney, Walkers (Jersey) Managing Partner.

Investment Funds Observations 2017 - Part One

After several years of lacklustre returns, nearly all strategies covered by Preqin have shown positive results in 20171, with event-driven and equity funds performing particularly well. According to Preqin’s survey of investment managers in June 2017, the leading drivers are largely political. Benign stock markets since late 2016 (the so-called ‘Trump Bump’), optimism around widespread US tax and regulatory reform, and possible further interest rate rises were identified as the top three contributors to improved performance. Investors have consistently ranked performance as the most significant factor in selecting new funds, as well as the most significant driver for reducing allocations, so a return to positive results is certainly welcome news for the industry.

Whilst positive performance, if sustained, will alleviate some of the challenges that that hedge funds have faced in the last decade, others will remain. Large institutional investors, who have been able to extract concessions on fees and other terms, are unlikely to give up on these demands just because they are now making the returns they expect. Managers will need to demonstrate that their fees are rewarding their genuine risk-adjusted performance, and not just favourable markets. Competition from other parts of the alternative assets industry, as well as a renewed enthusiasm for passive strategies among some allocators, will all need to be contended with.

From our vantage point as advisers to many of the world’s top hedge fund managers, these broader market forces flow through to our instructions, and ultimately drive many of the terms of the funds we advise.

In this series we take a look at what we have been seeing in the investment funds world. Part one will focus on hedge funds.

The master-feeder structure returns

After a few years of relative decline, the Cayman Islands-based master-feeder structure (that is, where both the master and the offshore feeder are registered in the Cayman Islands) has re-asserted itself as the most common fund structure. We have also seen a significant increase in the number of registered unit trust and sub-trust structures (mostly marketed to Japanese investors).

In prior years we had observed a trend for start-up managers avoiding a master-feeder structure, largely because they did not wish to incur the additional costs, or because they did not have a sufficiently large US investor pool. It is possible this trend is starting to reverse, following improving sentiment among US institutions and allocators. As well as a rise in completely new funds, we have been involved in a number of fund restructurings to turn a standalone vehicle into a master-feeder structure, principally in order to accommodate a new US-based feeder.

Hedge Fund Structures

1 Preqin Special Report: Hedge Fund Manager Outlook H2 2017

Investment Funds Observations 2017 - Part Two

From our vantage point as advisers to many of the world’s top hedge fund managers, broad market forces flow through to our instructions, and ultimately drive many of the terms of the funds we advise.

In this series we take a look at what we have been seeing in the investment funds world. Part two will focus on hedge funds.

A strong year for equity and credit launches
Equity-focussed funds have been among the top performers so far in 2017, and we have launched significantly more equity funds than any other strategy. Demand for credit funds has also remained high, as a strong run of returns and continued innovation on the part of managers in disrupting traditional credit markets continues to attract investors. Credit managers in particular have been at the forefront of challenging traditional hedge fund / private equity boundaries, using flexible Cayman structures to borrow elements from each and create innovative hybrid funds or to restructure existing funds to fit the changing investor demands. Strong performance in event-driven and macro strategies has also led to more launches in these areas compared with 2016.

hedge fund strategies
Fig.1 - Regulated Hedge Fund Strategies

Fees remain under significant pressure in regulated funds
In prior surveys, we had observed that management fees remained fairly consistent at the 2% level, with managers being more willing to lower their performance fees from the traditional 20%. This year, pressure on fees has extended to management fees, with less than 10% of the funds launching with a 2% management fee.

In one sense, this trend is to be expected, as investor surveys have repeatedly found that investors are generally frustrated by management fees whilst remaining willing to reward genuine performance. It follows that the fixed element of the fees should be under the most pressure. However, headline rates do not tell the full story: it has become common for managers to reduce management fees with individual investors in a side letter, whilst keeping the headline rate in the offering document at 2%. Consistent with other industry surveys, we see most hedge funds launching with a headline fee rate between 1.5% and 1.75%.

For performance fees, whilst the majority of funds launched with a headline rate of 20%, each year this majority is slowly eroded in favour of lower performance fees. This year, 55% of funds launched with a 20% management fee (down from 59% in 2016) and there is an uptick in fees between 10% and 20% with 27% of regulated funds launching in that range (up from 14% in 2016).

hf management fees
Fig.2 - Management Fee breakdown of regulated hedge funds

Walkers Leads Offshore Litigation - The Lawyer Offshore Litigation Report

Walkers has appeared in the latest The Lawyer Offshore Litigation Report. In the report, Walkers was noted for fielding the largest offshore litigation capability.

"Over the summer The Lawyer surveyed the top offshore firms about their litigation practices, strategy, and use of technology. What emerged most clearly is that litigation and general contentious work is big business for offshore firms... The largest firms by number of litigators tend to be those with roots in the Caribbean. Top of the table is Walkers, with 23 contentious partners in total..." - Catrin Griffiths

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