This is a hybrid solution, somewhere between normal operations and a voluntary liquidation that has emerged as a resolution procedure after the redefining of investment horizons following the 2008 financial crisis. Many of these situations are characterised by long run-off periods of illiquid assets, either directly owned or fund-of-fund type positions. Investors and/or managers may be averse to a formal voluntary liquidation for a variety of reasons, (publicity, perceived loss of control, fee concerns etc), and instead are often looking for a cost-effective solution that is in effect a replacement for a manager or general partner at a more definable cost when compared with a formal liquidation procedure.
Frequently managers reach the stage where the fees and work load cannot sustain or justify the costs of maintaining the associated infrastructure of continuing operations, but where there remains a need to hold illiquid assets to maturity, which can often be several years.
A Soft Wind Down can achieve this outcome by effectively handing over responsibility for the fund or for the side-pocket SPV to a third party such as FFP. Frequently we find that managers wish to retain a small level of involvement through a board position, or as a paid or unpaid advisor.
We also have considerable experience of secondary market transactions dealing with remaining stub positions. Depending on the number of underlying investors and investments it may be possible to retain or make savings by terminating other service providers such as the administrator, custodian or auditors.
Soft Wind Downs can be priced in a variety of ways, typically with a fixed fee for routine monthly or quarterly work, with other work streams negotiated separately. Terms are governed by an engagement letter.
We have a team of qualified insolvency practitioners, who are very experienced in complex cross border engagements, devising and implementing asset recovery strategies, cross border litigation and stakeholder management.