Does loyalty lie with the lawyer or the law firm?
Big changes were afoot in the London hedge fund legal scene last week, after New York-based Akim Gump swooped on Simmons & Simmons
15/07/2009
Gottex considers legal action against New Stream
Gottex considers legal action against New Stream
Swiss-based fund of hedge funds (FoHF) Gottex is believed to be considering legal action against ABL fund manager New Stream, claiming that one of its funds used levels of leverage that fell far outside its original mandate.
Although formal litigation proceedings have yet to be launched, any future case is likely to be filed with the Bermuda court system.Commenting on the affair, Gottex said that it did not talk about “pending legal” actions. A spokesperson for New Stream confirmed that the firm was aware of the issue, thought to concern its New Stream Secured Capital Fund.
Meanwhile, a New York court has blocked an attempt by Stratos Advisers to halt arbitration with the same fund, following an allegation that New Stream provided preferential redemptions to certain investors and refused to honour Stratos’s additional redemption request.
In a decision made by the Southern District Court of New York, Judge Barbara Jones said Stratos did not have a compelling reason to deviate from the intent of the contract.
“I do not agree with Stratos that the respondents filing of an arbitration demand prior to Stratos' lodging a formal complaint going into court in any way contravenes public policy,” she said. “Public policy favours arbitration of the arbitral disputes. The respondents were not required in this case to stop in court or wait for Stratos' approval before beginning this process.”
Stratos’ initiative – which is separate from Gottex’s plans – comes after New Stream suspended redemptions late last year following a large number of requests from many of its investors who were exposed to the Tom Petters’ fraud. Although New Stream itself did not have exposure to Petters, the principals of the fund used gates and pro-rata payments to investors as defensive measures.
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Editor's view: 8 February 2012
Speculative moves, a perceived landgrab and a potential bidding war in the hedge fund sector have all opened up in recent weeks
Comment: Julian Korek
"Advisers need to be analysing key considerations and determining where they fall in the spectrum of SEC registration; no easy task given the scope of the legislation"
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