Implications Of Gottex Funds v Stewardship Credit Arbitrage Fund

Introduction

The Supreme Court of Bermuda recently ruled in favour of investors in a hedge fund in BNY AIS Nominees Limited & Ors v Stewardship Credit Arbitrage Fund, Ltd. (the "Judgment") in circumstances in which the fund had purported to pay redemption proceeds in kind.

This Advisory considers the implications of the Judgment for the payment of redemptions in kind, including through the use of "synthetic" side pockets ¹, by Cayman Islands and British Virgin Islands hedge funds. The Advisory makes recommendations for how existing funds should proceed when planning to pay out redemption proceeds in kind, and suggests issues to consider when drafting the documents for new funds.