In the run-up to July 2014, when a sprawling set of regulations took effect to make Europe’s hedge funds and private equity funds more transparent, thousands of asset managers needed legal advice.
They wanted to know not only what to do to comply with the new laws — known as the Alternative Investment Fund Managers Directive (AIFMD) — but also how individual EU member states would implement the rules, and when. While some answers had to be tailored to specific funds, many of the questions were universal.
Simmons & Simmons, a UK law firm whose clients include many asset managers and hedge funds, saw an opportunity with a product it had created several years before, during the onset of the financial crisis in 2007.
Its Navigator suite of online subscription services was aimed at just that scenario — when hundreds of clients from the same industry asked the same questions. The fund managers needed to know the basics, such as when the rules would take effect and how to comply, but they also needed regular updates from each European country on how that jurisdiction was interpreting the new rules.
“It was a case of us trying to respond to a huge amount of uncertainty,” says Sarah Chambers, a financial regulatory lawyer at the firm. “There was supposed to be harmonisation on various issues, but there have been a lot of variations.”
Despite the usual slow pace of change in the legal industry, how firms creatively and more efficiently deliver legal work has evolved as they seek competitive advantage.
In the past few years, leading UK firms have begun using contract lawyers, and have opened lower-cost service centres in cities such as Belfast, Manchester, Glasgow and Birmingham, shifting work out of costly London. Lawyers are also collaborating with third-party providers, adding on consulting or other services and using document automation technologies. The rise in the use of project managers is indicative of the efficiency drive.
Linklaters has tackled the issue through its business improvement, knowledge and learning and technology teams, which identified eight areas for improvement, including new uses of technology, paralegals and lower-cost resources, and document standardisation. It has produced savings of up to 35 per cent. The business improvement team, created two years ago, brought in non-legal expertise, including project managers, to increase the efficiency of its projects.
Axiom, a legal services company that provides teams of lawyers to work on projects in-house with clients, is resourcing a project at a global bank to draft and negotiate its derivatives and master trading agreements. The deal, worth $73m, is being staffed mostly at centres in Belfast and Poland, with senior lawyers, derivatives specialists, business and data analysts, technologists and project managers working together.
Since Allen & Overy and Herbert Smith Freehills opened service centres in Belfast in 2011, several other firms, including Baker & McKenzie, have followed suit. At the time, A&O global managing partner Wim Dejonghe says the move was about the firm asking itself: “Are we operating in the most efficient and cost-effective way possible?”
Berwin Leighton Paisner set up a legal services delivery team in Manchester. The firm has created an “integrated client service model” to offer alternative resourcing for projects. That includes using its Manchester staff, third-party providers and LOD (Lawyers On Demand), its contract lawyer agency. Clients include Deutsche Bank, Tesco, Barclays, National Grid and Aviva.
Simmons & Simmons’ Navigator system was created by partner Charlotte Stalin after her team was approached by a big hedge fund client that wanted a way to access information on regulations in different jurisdictions.
With laws in the financial services industry constantly changing, the fund wanted to be sure it was targeting the most appropriate investors.
“We thought, let’s see how we can commoditise this,” Ms Chambers says. “It was so much part and parcel of what we were doing on a daily basis, it just made sense to streamline it.”
Navigator gave the firm’s asset management clients access to regularly updated advice on how to comply with AIFMD and other fund regulations in more than 90 jurisdictions, at a fraction of the price of bespoke advice from counsel in each jurisdiction.
More than 300 organisations subscribe to the service, encompassing more than 6,000 individual users. Navigator has grown to include channels with advice on securities, share disclosure and derivatives. Tax, corporate finance and lending services are being developed.
“It’s been a very organic process, listening to clients and seeing what’s going on in the market,” Ms Chambers says.
“The feedback has surpassed our expectations in terms of how it’s been performing. It’s been a huge opportunity to assist our clients and attract new ones.”