Seward & Kissel Releases 2021/2022 Hedge Fund Side Letter Study

October 25, 2022

Seward & Kissel is pleased to release its 2021/2022 Hedge Fund Side Letter Study.

This year, for the seventh year in a row, we have conducted a Study examining side letters negotiated by our hedge fund manager clients (the “Study”). The Study covers the period from July 1, 2021 through June 30, 2022. We believe that the number of side letters covered by the Study is large enough to extract a representative sample of important data points that are relevant to the industry. Key takeaways include:

  • Excluding certain outliers, the average regulatory assets under management (“RAUM”) of the Mature Managers in the Study was approximately $4 billion (as compared to a much higher $6.3 billion in the prior study). This significant decrease over last year’s amount may reflect a greater unwillingness on the part of very large managers to enter into side letters, many of whom saw increased demand during Covid-19 as safer, known investment options.
  • The average RAUM of Newer Managers in the Study was approximately $210 million, as compared to $152 million in the prior study.
  • Funds-of-funds continued to be the most common category of side letter investor, representing 51% of all side letter investors, while the non-profit institutions category had the greatest increase from 3% last year to 11%.
  • This year’s Study saw MFN provisions solely reclaim the top spot by appearing in 46% of the side letters (slightly higher than last year’s 43%)

To download a copy of the Study, please submit the form below.