Oct. 16, 2014
Cole-Frieman & Mallon LLP
See more on Cole-Frieman & Mallon LLPSan Francisco | Fund Formation
"There is literally zero chance that that will happen," Cole-Frieman said. "I always tell my employees that I'd rather run a McDonald's franchise than join a big firm."
Yet there have been many calls made to the firm by consultants and heads of practice groups with offers extended. The reason for the frenzied interest is the firm's success in the hedge fund industry.
Founded in 2009 at the height of the downturn, Cole-Frieman & Mallon sought to help investors trying to hedge their bets through new fund launches. The partners found that they had stumbled onto a wide open market.
"We are very fortunate to take advantage of this opportunity," Cole-Frieman said. "There are a lot of options at the top and bottom for getting hedge fund advice. You can go to a solo practitioner or to a large firm but there really isn't much in between."
Cole-Frieman said that he has heard from clients who tell him that the situation has been similar to the Goldilocks porridge scenario. Neither sole practitioners nor large firms seem perfectly situated to meet their needs.
"Fund managers want to have a firm that can offer a certain number of staffers," he said, "b ut at a large firm, you might not necessarily be getting advice from the best sources. What we have found is that these fund managers are much more entrepreneurial than their lawyers. At our firm, we feel like having that same spirit enables us to understand what a fund manager needs without having that large staff. "
Both Cole-Frieman and partner Bart Mallon have other businesses.
"I also work in compliance consulting and I'm a broker dealer for hedge fund placement," Cole-Frieman said.
Mallon said that his outside endeavors have become more like a second full-time occupation.
"I've spent much of my time this year in my third party marketing operation for hedge funds," he said. "Right now that business is called Sansome Strategies but we are actually in the middle of changing that name."
While the firm's partners say that the service does not work with current clients of their legal services, they say it allows them the ability to woo fund managers with a wider array of service offerings.
Mallon is optimistic about the prospects of his firm as he looks at the current state of hedge fund policy.
"It has been an interesting past 18 to 24 months," he said. "The implementation of Dodd-Frank has been going on and we've had a bunch of other regulations come into effect."
Mallon said he believes that increased regulatory scrutiny will lead to greater precautions on the part of fund managers.
"What we've seen is more emphasis on organizational structure," he said. "It's getting tougher for emerging managers and smaller managers to deal with it on their own."
Peter Lupoff, founder of Tiburon Capital Management LLC, agreed with Mallon's assessment. He said that Cole-Frieman & Mallon's advice to his fund both before and after launch was vital.
"There is materiality of the launch that has to be sorted out," he said, "but then after that you have a real business. There are always going to be ways in which you change the types of products being offered and who can invest in them."
Lupoff said that compared to bigger firms, Cole-Frieman & Mallon stands out for its ability to look at hedge fund issues from a richly experienced perspective. Before founding the firm, Cole-Frieman served as general counsel to a fund and was a fund manager himself.
"His firm provides the highest level of sophistication and expertise in their field," Lupoff said, "but they are also more economical than the large firms. Also, you are probably not going to get anyone at those kinds of firms who has the expertise and experience that Karl has."
- Alex Shively
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