Orrick Library Seminar: Saddled with Side Pockets? Investment Considerations in Illiquid Assets (Session #2)

The Orrick Library Seminar Series

Seminar | February.27.2019 | 12:30pm - 2:00pm (Hong Kong Time)

Orrick Hong Kong

Investing opportunity sets in inefficient market cycles vary. Given market anomalies, they reside for extended periods in less liquid instruments such as distressed debt, private equity, certain types of loans, or in the securities of firms experiencing turnaround situations. These securities are difficult to price (due to limited market participants, infrequent transactions, complex structures, or highly uncertain future performance). But, they offer potential for excess returns over the risk free rate. Investors who have the ability to buy and hold these securities may thus stand to profit.

Hedge funds are structurally illiquid since they limit investor liquidity via lock-ups, varying redemption frequency and redemption notice periods, and gates.

A hedge fund manager who decides to invest in an illiquid investment adds yet another dimension of illiquidity to its liquidity profile. Investors who invest with this fund are betting on an illiquidity premium. Or is it actually a manager premium?

A hedge fund manager who invested in a liquid asset that becomes illiquid has a liquidity problem forced on her. And now must face a variety of issues tied to the changed portfolio risk profile. Can these issues be resolved in a way that is not adverse to investors?

In either case, managers should understand the “weeds” of hybrid fund accounting nuances and be prepared to live with a set of compromised choices in meeting investor demands.

Please join Orrick’s Scott Peterman in a one-hour discussion featuring lots of Q&A on a topic with lots of traps for the unwary.

  • Trends driving hedge fund managers to invest in illiquid assets
  • Sources of illiquidity—different assets have different liquidity characteristics
  • Illiquidity premium can be tricky to earn… is there a liquidity premium at all?
  • “We will sell no wine before its time”
  • Where are current opportunities?
  • Hybrid funds—a curse? or a blessing?
  • “The Weeds” of Hybrid Fund Accounting and Fiduciary Issues
  • Handling Write-ups and Write-downs
  • Adjusting high water marks and dealing with stranded performance fees

CPT/CLE Credit

1 CPT/CLE credit is being accredited for this seminar. No CPD point will be accredited.

To register, please provide your name, company, title and email address at the link below by 22 February 2019.

Seats are available on a first-come, first-served basis. Walk-ins will not be accepted on the day of the seminar.

For questions about the seminar, please contact Joyce Chan at +852 2218 9221 or [email protected]

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CLE Credits Available: Y