Where are the new or expanding markets for hedge fund legal services? Will law firms need a global presence or will they be able to offer only local or regional services to hedge fund clients in future?

“EU onshore centres will grow in importance as a result of the alternative investment fund managers directive,” says Simon Firth at Kaye Scholer. He also believes Asia and South America will increasingly provide new managers.

At Aequitas Legal in Malta, Omar Zerafa thinks if regulators can come up with a “robust yet flexible regime regulating funds, there will be an expanding market in the EU”.

At A&L Goodbody in Dublin, Brian McDermott and Siobhán Moloney believe the market for Ucits funds, especially those offered by traditional hedge fund managers, is expanding significantly. They say hedge fund managers will continue to rely on local law firms with expertise in individual jurisdictions and will rely on ‘best of breed’ advice in each jurisdiction where they operate.

In the Cayman Islands at Higgs Johnson Truman Bodden & Co, Wilton McDonald is backing Brazil, Russia, Indian and China (the BRIC countries) as well as some Middle East countries, like Bahrain and Qatar. He also sees potential in some African countries.

“Firms do not need to have a global presence to be successful in attracting business or being profitable,” he says. “They just need to have a global marketing outlook and flexible approach and the ability to service key markets around globe. It is not realistic, practical or cost-effective to have offices in each country. Better to have offices in key regions,” concludes McDonald.

In New York, Steven Nadel at Seward & Kissel agrees that Asia and the Middle East are attractive possibilities. He also agrees that firms can stay local but will need affiliations with “proper local law firms”.

Asia may be the largest expanding market for hedge funds, believe Nora Bullock and Simon Atiyah at Lovells in London. Compared to the US and the UK, this region is under-represented currently.

“Investors in Asia, the Middle East and South America are seeing the benefit to alternative investment products and will spur demand for hedge funds,” says Henry Smith at Maples and Calder in the Cayman Islands.

At Withers in London, John Langan believes giving cross-border expertise is useful if “synergies can be found such that a law firm can provide the full creation service with advice on structuring, implementation of structuring and provision of tax advice.”

In London at Brown Rudnick, Sonya Van de Graaff says the new and expanding markets for hedge funds depend on growth and opportunities. She tips India as an area of interest in the coming years.  “But of course the level of interest depends on political and legal risk and these need to be assessed jurisdiction by jurisdiction,” she adds.

Back in Cayman, Gray Smith at Appleby says his firm’s view is that different markets in terms of where the investors are coming from and where the fund is investing require different structures and jurisdictions. “You cannot simply say we can offer you A or B, and we can shoehorn you into one of them. Which do you want? As this side of things comes more into focus, you have to be able to say ‘the very best place for you is C and we can help you out there’,” says Smith.

Firms need to focus on providing local legal advice from a global platform, agrees Robert Briant at the British Virgin Islands office of Conyers Dill & Pearman. “Specifically, hedge fund managers, as well as their investors, expect legal counsel to be available locally and in the same time zone but to also have expertise in the jurisdiction of incorporation.”

So he thinks law firms will need to have offices in multiple jurisdictions to cater to the needs of their clients. “It is not desirable for law firms to expand beyond their core practice of providing legal advice to hedge funds and their managers. To the extent that law firms begin to offer additional services, such as hedge fund administration, they quickly run into conflicts of interest which make it very difficult for them to act in the best interests of the hedge fund,” concludes Briant.