Five Key Litigation Risks For Private Funds

From conflicts of interest to subscriptions lines, lawyers flag up the five issues most likely to trigger court action to Victoria Robson

Litigation is rare in the private funds industry. For both GPs and LPs, a public dispute runs the risk of reputational damage that could, not least, threaten a GP's ability to raise its next fund and an LP's ability to commit capital to other managers. The preference has been to resolve any conflicts behind closed doors.

However, while managers and investors have been reluctant to go to court, regulators in the US and Europe have stepped in to police the industry with some violations carrying a criminal liability, says Samuel Kay, head of investment funds at Travers Smith.