As law firms scrutinize the business models of private funds, and consider funds’ needs at every step from formation through exit transactions, the firms actively compete for lawyers with decades of experience in the private equity realm. The latest firm to expand its reach through a lateral hire is Orrick Herrington & Sutcliffe.
Yong-Nam Jun, a former DLA Piper counsel and former Kirkland & Ellis partner, joins Orrick in Los Angeles as of counsel. Yong, who is admitted to the bar in California and Massachusetts, represents sponsor- and investor-side clients in cross-border deals. He advises clients at all stages of fund formation, and has worked with funds and companies in Korea and Indonesia as well as the United States. Yong has advised Asian sovereign funds for over five years, going back to the start of the financial crisis. He said one strong motivation was the fact that while the U.S. market was slow, a number of the Asian funds were launching their investment funds and had a lot of dry powder to put to use within the asset class. He wanted to help them build up their programs over time. Yong said that by now, he has worked on nearly a hundred deals with Asian sovereigns, and has endeavored to provide them with a framework for contemplating investments into private equity.
Yong observed that the formation of private equity funds entails close work with the principals, and a more consistent exposure to the market than the principals may have.
“While they go to market once every few years, you’re seeing new fund formation deals every week. You, as a lawyer, may have a better feel for the marketplace than the business principals do in fund formation. As you advise them on the state of the market, you act as more of a business advisor rather than just executing on deals that are brought to you. With some of the mid-sized funds, you’re very close to the investment principals themselves as they’re negotiating terms with the outside investors and as among the team,” Yong commented.
Yong described the mid-markets in different geographies as strong sources of value. The marketplace is highly bifurcated with respect to GPs, he said, and those that are popular in the marketplace have retained favorable GP terms, particularly for strategies where access is an issue.
Yong went on to identify a few more trends with regard to successful emerging managers.
“You really want to be a group that has a track record of working together. Those are situations where I see most traction and interest in the marketplace, and I’ve been doing this since 2000. LPs are much more discerning, they’ve seen the ups and down of the markets. Savvy LPs seem to invest into what are smaller, but high-quality, funds and not just the brand names,” he stated.
According to Yong, there is often pressure for keeping fund sizes manageable from a strategic point of view, so that the founders don’t depart from what brought them success in the first place. LPs are sensitive to this issue, he said. Yong identified a focus on key-person provisions, relating to who is spending time on the fund and succession issues. To some extent, LPs are in competition for opportunities, and they share an awareness that people who may have had success executing $10 million transactions from a $100 million fund may not manage to translate that strategy into $100 million transactions out of a $1 billion fund.
“The bigger LPs, whether Asian or based out of North America, are putting a lot of dollars to work, so they would like to get more bespoke service rather than just off the rack. There is a lot of push to single investor-entities, separate accounts, separate mandates, and the like. There’s always tension between that and keeping your general investor base happy. But this seems to be an increasing trend,” Yong continued.
“In real estate funds, we’re seeing creative structuring because of the U.S. tax on foreigners holding U.S. real estate. We’re seeing REIT structures and other structures to address restrictions where a sovereign fund cannot hold over 50 percent of a particular real estate vehicle – so we see a lot of innovative strategies,” he added.
Yong holds a J.D. from Harvard Law School, an M.S. from the California Institute of Technology, and an A.B. from Princeton University.