Beaumont and Berman Provide Guidance for Private Fund Investors Navigating the COVID-19 Crisis

April 23, 2020

In a recent webinar hosted by the Investment Management Due Diligence Association, litigation partners Anne Beaumont and Scott Berman discussed key considerations for private fund investors navigating the coronavirus crisis, a summary of which was then published by the Hedge Fund Law Report.

In the presentation, Ms. Beaumont noted that liquidity management is a major concern given the unprecedented volatility in the markets and discussed a number of fund and vehicle liquidity management tools available to managers.  She advised that investors should carefully review their fund documents and communicate openly with managers about remote working and continuity of business challenges, portfolio and risk management issues, leverage concerns, and potential regulatory inquiries.  In all cases, Ms. Beaumont urged investors to use open-ended questions, be wary of anything that sounds like business-as-usual, and employ “auditor-like skepticism.”

Mr. Berman commented that periods of market volatility and stress tend to give rise to more opportunity for fraud and misconduct.  For investors seeking remedies, Mr. Berman highlighted important provisions to review in their fund documents, and advised investors to carefully document any suspected misconduct.  Mr. Berman noted that due to COVID-19 shut downs, access to some courts is now more limited, and thus injunctive relief may be less available.  While applicable statutes of limitations for damages are long enough that investors may be able to address claims later on, there is always a risk that a manager may become judgment-proof in the meantime.  Ms. Beaumont and Mr. Berman also addressed considerations surrounding other remedies like removal of fund managers and involving regulators.

The full Hedge Fund Law Report article can be found at the link below.

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