IFLR 1000
The Guide to the World's Leading Financial Law Firms

Investment funds work in Hong Kong continues to be largely dominated by a small number of high-profile players, though lots of new practices have sprung up and are trying to get a piece of the market. Leading US firms like Weil Gotshal & Manges that are known for private equity work have followed many of their top international private equity clients to Asia, and developing funds practices has been a natural extension of their core business. "Everybody is developing fund formation practices in the private equity space as a compliment to their private equity work," comments one veteran business development professional at a leading firm. "Because private equity is all about relationships, the firms that are almost in-house with the leading PE firms also want to go to them for their funds work. It's a small business, but everybody wants a piece of it."

Firms like Simmons & Simmons and Deacons with a long reputation in public fund formation continue to lead the market in this area. Their long-term experience with successfully setting up retail funds in Hong Kong and knowledge of government entities have helped ensure that they remain strong in that sector of the market.

One trend to watch in the fund formation space is the increasing tendency for top Asian fund managers from international private equity houses to set up their own, all-Asia funds. This may mean more space for alternate, smaller players to enter the funds market in addition to the massive international private equity houses. Hedge funds also continue to be a strong product.

As with debt offerings, Rmb fund formation is a hot topic in the market right now. While relatively few Rmb-denominated funds have been formed so far, it is likely that they could become a presence in the market as quickly as dim-sum bonds have. International players are seeing the prospect of partnering with Mainland fund managers as an increasingly attractive prospect despite the regulatory, risk and structural components that are still being worked out in this relatively new market.

Deacons' Financial Services group advises on the range of funds, from hedge to retail and private equity fund formation. The firm is best known, however, for its top public and retail funds practice, which includes work relating to China and the larger Southeast Asia region. As a partner at a rival firm puts it: "Deacons is really at the top of the retail funds market in Hong Kong. Deacons is really a go-to firm for this type of fund formation. They have a really strong history of advising on these in the Hong Kong market." In fact, the Deacons team's deal list shows a number of "firsts" for Hong Kong's retail market this year.

Partner Susan Gordon recently advised on the first Hong Kong authorisation of a Malaysian Islamic fund. The fund's development came as a result of the November 2009 signing of a Declaration on Mutual Cooperation on Development of Islamic Capital Market and Islamic Collective Investment Schemes by the SFC and the Securities Commission of Malaysia.

A Deacons team led by partner Taylor Hui also recently represented Aviva, the world's fifth-largest insurance group, on the establishment of a fund management joint venture in China. Deacons also advised on the authorisation of the world's first ever Rmb-denominated fund outside mainland China.

Debevoise & Plimpton is one of the most admired firms in Asia for private equity fund formation, as clients and partners both tell us that this firm should indisputably be ranked at the top. The firm's top name in the US-combined with the fact that Debevoise set up its operations long before the current trend of US firms following their private equity clients to Asia-has made the firm the "go-to" practice for many top private equity clients. The firm's impressive roster of foreign sponsors includes AIF Capital, Baring Private Equity, The Carlyle Group, Credit Suisse and Deutsche Bank.

The practice seems to be strongly based on the loyalty of its fund formation clients, who trust lead partner Andrew Ostragnai for all of their activities. "He's simply the most experienced," says one client: "he's strong on both the commercial and technical sides". Another adds that, "Debevoise is still regarded as a leader in Asia. They have been here a long time and have great clients."

Sidley's crack fund formation team is known for being at the top of private equity and hedge funds work in Hong Kong. Peers have respect for Sidley's well-deserved prominence in the market and clients also have praise for the team: "I view them as valuing us as a client," noted one, "they have been flexible in their approach, particularly when in the earlier stage of our business they acted as a positive partner rather than a service provider. In terms of being helpful and recognising when a business is at a very early stage, they're great."

Their general competence and ability to advise on a wide range of areas is excellent," another client says. "They give commercial advice based on technical knowledge, but it's also practical. I view them as being proactive and thoughtful and innovative. We view them as a top firm."

As an example of the type of mandates Sidley is able to pull in, partner Effie Vasilopoulos is currently advising Morgan Sze in connection with the establishment of the Azentus hedge fund platform. The Azentus launch will represent the spin-out of Goldman Sach's proprietary trading desk, and is generally expected to be the largest hedge fund launch in this history of Asian markets (expected to be between $1-1.5 billion).

Sidley's team also represented Soros Fund Management in the well-publicised establishment of its first Asia office in Asia.

On the private equity side, Sidley advised BOCOM (Bank of Communications) International (Asia) in the establishment of their private equity management platform and the launch of their first Asia private equity fund. The fund launched in March 2010, and was valued at over $500 million.

Simmons & Simmons continues to have a dominant position in public, exchange-traded funds (ETFs) on the Hong Kong market. The firm has also advised on a number of hedge funds and new types of commoditized funds this past year.

"I have used Simmons & Simmons services in setting up funds for the past seven years," one client tells us, "and my impression is that S&S has quite a good relationship with their clients. Rolfe Hayden is knowledgeable and easy to communicate with, and their accessibility is good-you are able to reach the partner and associate within the same day. They give clear and easy responses to queries, and are able to address our business concerns and provide practical solutions and recommendations."

Simmons & Simmons' clients also praise the firm's strong, established ability in the retail funds arena. "The firm has a very strong level of knowledge and solid expertise in regards to Hong Kong SFC regulations on both licensing and investment products," says one, while another again praises Hayden: "He is very knowledgeable," the client says, "able to understand the client's business needs and provide recommendations. Associates also have good knowledge. They're experienced with the Hong Kong SFC authorisation process, and hence are able to avoid unnecessary delays. They're very efficient and professional."

The funds team recently advised HSBC Investment Funds (Hong Kong) on the formation, SFC authorisation and April 2011 SEHK listing of four Greater China-focused exchanged traded funds. The four ETFs were novel in that they were the first to be initiated by HSBC in Asia and on the SEHK. One of the deal's unique features was that HSBC MSCI Gold Dragon tracks a composite index made up of the MSCI Hong Kong, China and Taiwan indices, thus the first ETF tracks its index by investing in the three other ETFs on the same platform as a feeder fund ETF.

Simpson Thacher & Bartlett is at the top of the market for private equity fund formation in Hong Kong. The firm's leading private equity practice has been a natural development of its leadership in the private equity space, which means that Simpson Thacher fields an impressive list of top private equity houses as clients. These clients can't seem to say enough about leading partner Phil Culhane and his counsel Adam Furber.

"They were doing our PE fund set up for us," one client says, "and we found them very helpful and experienced. For instance, they have very strong expertise on how to determine best structure for clients, and their advice was uniquely tailored to our specific needs."

Another client notes that, "Occasionally we use local firms, but we use STB where special expertise is needed. Philip Culhane is the key guy. When we need them, Philip is very responsive, which is one of the things that endeared us to Simpson Thacher. Even when he's busy, when we get in touch with him he's immediately on it. Some of the firms out here don't have a stable of lawyers and the 'ships' tend to be less manned."

One recent example of Culhane's work was his representation of New Horizon China Capital III (and its predecessor fund) outside counsel. New Horizon China Capital III is a fund that makes private equity investments in China, and the fundraising spanned the duration of the recent global financial crisis with a final close of $750 million. Culhane also recently advised the approximately $1 billion FountainVest China Growth Capital Fund as outside counsel. The fund, which makes capital private equity investments in China, includes an offshore synthetic Rmb-denominated vehicle which is believed to be first of its kind, as well as a standard US Dollar vehicle.

Weil Gotshal & Manges has been a rising star in the fund formation space this year, having obtained top funds partner John Fadely from Clifford Chance (a trick the firm repeated later in London taking another team from the UK firm) and setting him up with a strong team to establish Weil's Hong Kong practice. Indeed, many clients have followed Fadely to his new firm and proved a catalyst for the new practice.

Most of Weil's partners - including Fadely - are fluent in Mandarin, which is an asset to clients who aim to form China-focused funds and Rmb funds. The firm's Hong Kong law capability also means that Weil can advise clients on local fund regulations.

Clients have high praise for Fadely and the practice that he is building at Weil. "He gets to the point very quickly, and we don't waste time in this business. He is always involved. His team is relatively new in Asia-last year he didn't have a team and was on his own. Now he's got Jason Nelms in Hong Kong and more lawyers in Beijing and Hong Kong. He gives a lot of time to clients and works very hard. John's also a very nice guy. His clients trust his judgment and technical skills, and he fights for them in a good and honest way."

Another loyal client adds that, "John is an experienced funds lawyer and was able to advise not only from a pure documentation perspective, but also from an industry practice point of view. Moreover, he is an extremely commercial lawyer and provides value-added input into preferred approaches to take, key issues and negotiation strategies. He also makes a tough negotiator, and is therefore an asset to have if your deal involves heavy negotiation against tricky personalities."

Clifford Chance's investment funds practice primarily focuses on private equity, real estate and hedge fund formation. While the team experienced a major shake-up last year, including the departure of partner John Fadley to Weil Gotshal, the funds practice still seems to be winning significant mandates in its historically strong areas.

The firm's top regulatory team also advises clients on a range of SFC-related compliance issues, and has a history of helping top international hedge funds to obtain licenses for the Hong Kong market. The investment funds team also regularly advises Asian sovereign wealth funds as investors counsel.

The firm's strength in real estate fund formation is underscored by several key mandates, including partners Mark Shipman and James Walker's recent advising of Winnington Capital on the establishment of its $1 billion Trophy Property Development Fund II. The team also advised Phoenix Property Advisors on the establishment of the Phoenix Asia Real Estate Investments IV(A) and Phoenix Asia Real Estate Investments IV(B) funds.

In the private equity arena, Matthias Feldmann advised Darby Overseas Investments on the establishment of the Asia focused Darby Asia Mezzanine Fund II - a mezzanine finance fund with an Asia focus. Feldman, Shipman and Teresa Leung also recently advised CITIC Capital on the establishment of the CITIC Kazyna Investment Fund I in conjunction with Kazyna Capital Management JSC. Kazyna Capital Management JSC is a subsidiary of the Republic of Kazakhstan's sovereign wealth fund Samruk-Kazyna, and the $200 million fund will focus on potential-growth infrastructure projects non-energy investment opportunities in Kazakhstan and China.

Kirkland is one of the newer US private equity and fund formation firms to follow its prestigious private equity clients into Asia and the small but growing office is making its mark on the Hong Kong market with fund formation work in China and across the region.

Clients praise the firm's efforts to build their fund-formation practice in a client-centred way. "They are incredibly responsive," one client tells us, "They have a quick turn around and are good quality. Justin and Albert and Kirkland are energetic, hardworking and keen to build their business."

Another client had positive things to say about the partner Justin Dolling. "He's very technical, very capable," the client says. "His knowledge of technical areas of fund structuring is very commercial. He overlays the technical advice with the practical."

Kirkland's fund formation team recently advised Orchid Asia Group Management on the formation of the $600 million Orchid Asia V fund. Orchid Asia V specialises in growth capital and buyout investments in Asia, with a focus on China.

In 2010, partners Albert Cho and Justin Dolling also represented Hahn & Company Korea in the formation of the fund Hahn & Company I. The Korea-focused buyout fund was formed by former Morgan Stanley Private Equity Asia Chief Investment Officer and Managing Director Scott Hahn and the $500 million fund is the largest Korea-focused private equity fund to date with a broad international investor base.

Bingham McCutchen is a relatively new player to Hong Kong's market, as is its fund formation practice. However, the emerging practice has been garnering praise from clients who see the firm as "one to watch." Bingham's Hong Kong fund formation practice is led by Anne-Marie Godfrey, who brings her experience in funds ranging from pooled investment vehicles to hedge funds to retail and private equity.

One client notes that, "Anne-Marie and the team at Bingham are on par with tier two practices," and they expect to watch the firm continue to develop.

Orrick Herrington & Sutcliffe's private equity team is led by experienced partner Sook Young Yeu, and the team has experience advising on a broad range of fund formation from private equity to real estate to hedge funds. The firm's strong China capability also means that it has been involved in advising on a number of Rmb-denominated China funds with offshore components, and the team represents clients in China and across Southeast Asia.

Orrick has advised a number of (confidential) clients on fund formation in Hong Kong and other jurisdictions this year. The practice also includes representing funds in investments, representing issuers, fund management regulatory work and investor representation.

This past year Timothy Loh has advised both the hedge fund and private equity operations of a US-based private investment management firm on Hong Kong law matters relating to the launch of a new Asia-focused private equity fund.