The Kerfoot Alternatives Update

There’s clearly a never ending stream of news and activity related to alternative investments, and Matthew Kerfoot, a leading attorney in the sector, periodically sends around an update of industry activity. We are pleased to publish his most recent update below:

Happy 2017!  Neuberger celebrates with their 10 investment themes in 2017.  Of interest are No. 4 – the credit cycle is getting long in the tooth but isn’t ready to turn yet and when it does more supportive fundamentals are likely to help absorb the impact.  Also, No. 10 – “private debt remains attractive” – even if banks again begin to lend, it is unlikely that they will rebuild the infrastructure required to compete in similar, less-liquid credit.

Here’s the full report:


An RBC advisory subsidiary – City National Rochdale – is launching a reinsurance-focused interval fund.  The fund will invest in cat bonds, insurance-linked warranties, 40 Act funds that invest in these assets and other insurance-linked securities.  This is a true interval fund – with mandatory quarterly repurchases at NAV.  The fund will strike a NAV daily and it looks like it will be offered daily to investors, at least through an initial distribution period.  Minimum investment though is $1 million.

Here’s the filing for the City National Rochdale Reinsurance Premium Fund:


A reader sent me the attached McKinsey piece from November.  McKinsey boldly states that the asset management industry is in a “once in a generation” transformation and identifies five reasons why.  Here are two:  1. Outperformance in equities and fixed income over the last 30 years was a historical anomaly and returns will fall 150-400 bps for equities and 300-500 bps for fixed income.  2.  Investors will reallocate from liquid, managed strategies “heavily” to illiquid private markets as investors seek alpha in less efficient markets.

Some of this thinking is reaching consensus (e.g., the secular shift to private markets) but the report overall is a good read.  It’s attached.


We recently closed on a swap structure for a well-known European commercial bank to allow the bank to seed an investment in a 40 Act fund while complying with certain US banking and 40 Act regulations.  The counterparty to the swap has begun discussions with other banks to see whether it may be of similar use to them.  Email me if you’d like to discuss or make a referral to the executives at the swap counterparty.


Last year Dechert was named Law Firm of the Year by Private Debt Investor for our work advising clients on fund finance structures and credit fund launches.  We’re honored to be nominated again for the award and thank everyone who voted for us – results should be out in the next month.

One more self-congratulatory note – as reported by Asset-backed Alert, Dechert was also number one for CLO representations for issuers.  Our 33 deals was more than the next 2 law firms combined…

It’s been a great run for us in credit – hopefully McKinsey’s bullish private markets call is more right than late.


Finally, here’s a fresh price on hedge fund management fees.  AlphaCentric converted a private fund to a mutual fund last month.  The fund, which invests long and short in equity options, priced at a 175 bp advisory fee, with 12b-1, AFFE and other fees, bringing the fees to 238 bps (net of the advisor’s fee waiver).  The mutual fund was able to use the hedge fund’s past performance – which is quite good!  See the box below from the prospectus and the recent update here:



If you would like to be added to Matthew’s e-mail list, or want to reach him regarding other matters, you can do so via this link: Matthew Kerfoot @ Dechert, LLP

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