Investment Conflicts Arising Out of Simultaneous Management of Hedge Funds and Private Equity Funds

May 7, 2015
The Hedge Fund Law Report

Types : In the News

As private fund managers seek to diversify their product offerings and lines of business, management companies are increasingly operating hedge funds and private equity funds simultaneously.  However, such simultaneous management gives rise to potential conflicts of interest, including issues relating to allocation of investment opportunities between the funds, possession of material nonpublic information, valuation and allocation of expenses.  The SEC has identified conflicts of interest as one of the top enforcement priorities for 2015, and the SEC’s Asset Management Unit is expected to continue examining advisers to determine whether they have appropriately discharged their fiduciary obligations to identify conflicts of interest and eliminate them or mitigate and disclose them.  See “ACA Compliance Professionals and SEC Veteran John H. Walsh Share Insights on SEC Priorities for 2015,” The Hedge Fund Law Report, Vol. 8, No 16 (Apr. 23, 2015); and “Conflicts Remain an Overarching Concern for the SEC‘s Asset Management Unit,” The Hedge Fund Law Report, Vol. 8, No. 10 (Mar. 12, 2015).  Accordingly, especially in today’s regulatory environment, managers must be aware of and mitigate such conflicts of interest.

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