In late 2015, BlueCrest Capital Management announced that it would be returning outside capital and transitioning to a private investment partnership, managing only assets of its partners and employees. In doing so, BlueCrest has joined the growing ranks of hedge fund managers who, for a number of reasons, have decided to close their funds to outside investment and convert into a private structure. Historically, hedge fund managers weary of investor demands; increased regulatory and compliance requirements; and potential publicity issues have typically converted to family office structures. See “Legal Mechanics of Converting a Hedge Fund Manager to a Family Office” (Dec. 1, 2011). However, there are options beyond a family office for taking a hedge fund private. This article, the first in a three-part series, explores the “going private” trend and the factors a hedge fund manager should consider when deciding to convert a hedge fund, as well as the options available once that decision has been made. The second article will examine the operational considerations a hedge fund manager faces when converting its hedge fund, including ongoing regulatory obligations and staffing concerns. The third article will detail the mechanics for taking a hedge fund private, including redemption of outside investors and costs of conversion.
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