We speak with Paul McCoy, a Partner at Morgan Lewis. Paul has approximately 1,850 lawyers in 30 offices around the world and is the global leader of the private equity fund formation practice at Morgan Lewis. In this area, he represents clients in three broad categories: (i) fund sponsors who are launching private investment funds and myriad customized private capital formation structures in all private asset classes, (ii) institutional investors negotiating very large investments in private investment funds and (iii) buyers or sellers in the secondary market trading their existing interests in private investment funds. Among his clients are two global investment banks, several thought-leading private foundations, three of the largest US state retirement pensions, two US-based insurance companies, and a prestigious fund-of-funds.
With such an impressive background in private equity, Paul reveals the key behind his vast amount of achievements and how sacrifice ultimately feeds the eyes towards the path of success.
What has been the biggest challenge you have faced in order to be as established as you are now?
I cannot identify any one biggest challenge. Rather, I believe my position today is the result of an accumulation of small sacrifices. Every time a client needs an answer or a deliverable on a timeline that will require me to work very late at night, over the weekend or on a holiday, I must decide if I am interested in doing so. Looking back on an accumulated basis, those sacrifices add up. A lot of people think they know, in some vague sense, what it means to make sacrifices, but few stop to think of what it really means. In my career, it has meant missing out on other aspects of life. Frankly, among the countless evenings, weekends and holidays that I sacrificed in service of my clients, there are three or four that I genuinely regret. So, for me, the biggest challenge has been the sacrifice of personal time in the aggregate over many years.
What advice would you offer aspiring lawyers, in order to help them overcome potential hurdles?
My response dovetails with the answer above: my advice is to dedicate a reasonable portion of your personal time to learning about the area of law in which you are focused and the broad context in which your clients’ needs arise. I can tell immediately if a young lawyer will succeed. Those that buy a relevant legal treatise out of their own money and spend time on their weekends reading it will succeed. Once you have a deep knowledge of law and a strong grasp of the context in which your clients’ needs arise, you are well positioned to do the enjoyable part of practicing law – providing sound advice to guide clients through complex matters.
What was your main motivation behind specialising in Private Equity and Corporate Law?
I have always been interested in how society has organised itself. I recall learning at a very young age the key distinction between communism and capitalism – essentially that capitalism is the private ownership of the means of production. That made me very interested in how such private ownership was implemented, which of course led to learning about corporations, financial instruments and transactions. I then realised that knowing the what still left me ignorant of the how. Laws are needed to ensure fairness and protect against exploitation and fraud in relation to how the private right of ownership operates (i.e., capitalism). This was extremely appealing. Add to all of this the raw challenge of negotiating on behalf of clients when huge amounts of money are at stake – the private fund matters we handle are routinely hundreds of millions of dollars and not infrequently billions of dollars – and you can see why this area of law is very appealing.
As a global leader, can you explain to Lawyer Monthly ways in which you must be ahead of your game to be globally based?
As the global leader of the private equity fund formation practice at Morgan Lewis, it is critical that I must constantly canvas developments in law and developments in the market that are important to our existing clients and that might be relevant to potential clients. It is very important that I understand the history of the private funds market as well as the trends, because you cannot really understand trends without understanding the history. The interconnectivity of markets around the world make this extremely interesting, as trends differ regionally while affecting each other globally.
Your clients include some of the world’s most prestigious funds of funds, global investment banks, state government pensions, world leading private foundations, insurance companies, private equity-styled real estate funds and sovereign wealth funds; can you walk Lawyer Monthly through how you prepare yourself for these clients, to ensure the process is smooth for them?
First and foremost, I listen to my clients and ask questions to make sure I understand their issues and goals. Many of my clients are operating at the very highest levels of the global asset management community; they have extraordinary intelligence and dedication – these are people making investment decisions in respect of billions of dollars. My greatest value-add is to find creative solutions to address my clients’ issues and help my clients achieve their goals. To do this, I must listen carefully and ask questions.
You are based in many regions, which do you think is the most competitive at this current time, in regard to private funds? Do you predict this to change over time?
The reality is that the private fund market is truly global, and competition is fierce everywhere, and it will always be so. That is bad news only if you view the world as presenting a finite amount of opportunity. I view the world as having an infinite amount of opportunity. To approach a world of infinite opportunity, Morgan Lewis has created a platform to represent clients in connection with private fund transactions all over the world. We have teams in North America, Asia, Europe and the Middle East handling private fund matters throughout the world in all aspects including: without limitation, fund formation; the secondary sales of private fund interests, individually, or as portfolios; customized private capital formation structures, such as complex separate accounts, captive funds, SMAs, IMAs, funds-of-one, co-investments, platform arrangements, consortia, and joint venture arrangements. Furthermore, our capabilities span all major private asset classes, including traditional private equity, venture capital, real estate, infrastructure, debt, real assets and more.
Throughout your years of practice, how have you seen investment trends change? What accounts towards these changes?
A very clear trend in private funds is that large investors are demanding increased customisation for their investments. The investment managers, as a result, are increasingly creative in finding ways to customise their financial products. The cause of this trend is multifaceted, but distilled to its most basic elements, the supply of investment management talent in private equity has increased to the point where investors have many, many options when deciding where to put their money to work. Investment managers are therefore using customisation as a means to differentiate themselves in a crowded market.
If you had the power to, what regulations would you change to enable your role to be easier? I would reduce the entirety of the securities laws and regulations to a simple law that prohibits engaging in fraud. I would then leave it to the courts and legal processes to resolve disputes. Adding a new regulation every time there is a bad actor is a fool’s errand that asymptotes near an infinite number of regulations, without adding substantively to protecting investors. Meanwhile, each additional regulation sends shockwaves through the industry as well-meaning market participants scramble to make sure they are in compliance with seemingly endless minutiae coming out of key government hubs.
You have dealt with several private fund sectors – which sector do you enjoy working with the most and why?
For me it is a three-way tie. First, I very much like representing funds-of-funds, because they have the most sophisticated and balanced view of the market. They must raise funds from investors, like any fund manager, but then they invest such money into other funds and as a result they experience the same frustrations as all other investors. Seeing both sides of the market is healthy. Second, representing real estate funds is very enjoyable, because real estate funds are often the most complex fund structures due to arcane tax rules that apply to real estate. Third, I very much enjoy representing pensions and foundations in connection with private funds, because such clients believe in missions greater than self-enrichment – the investment activity is a means to a goal beyond just turning money into more money.
What advice would you offer entrepreneurs that are seeking venture capital?
Venture capitalists might invest in a high-quality team with a mediocre business idea, but they will never invest in a mediocre team regardless of how high quality the business idea might be. Human talent is everything.
Is there anything else you are hoping to achieve in your professional career?
I have two key goals remaining: first, I would like to do my part in making the practice of law enjoyable for the generations who come after me. Simple things, that might seem obvious, go a long way. I encourage young lawyers to take vacations and not to worry about work while on vacation – nothing can be poured out of an empty cup. This only works if young lawyers are proactive in working with me to find coverage for matters while they are on vacation. Second, I would like to teach young people everything I know about navigating a career in law, to help them chart a course from the time they are in high school, through the day they wake as a partner in a major law firm. I had to find my way in the dark and it would be rewarding to shed some light on the topic for those coming after me.
What is the thing you like least about your career?
Many lawyers believe their role is to deceive others, in some fashion. Some will even boast of how they tricked an opposing lawyer or adverse party, whether through sneaky drafting of contracts or purposefully misleading statements during negotiations, or otherwise. I strongly disagree with this approach to practicing law. It undermines the reputations of lawyers, but much more importantly, it damages society. It puts an additional layer of misunderstanding between the parties. There is usually some level of misunderstanding between parties or they would not need lawyers in the first place, but for a lawyer themselves to purposefully add additional misunderstanding is wrong. The lawyers should be working to reduce, not increase, the amount of misunderstanding. On very rare occasions, clients have asked me to be devious in my approach to representing them and I have declined them. If some lawyers do not have the courage to do the right thing, they should at least have the courage to refuse to do the wrong thing.
What is the thing you like best about your career?
My clients and my colleagues are all extremely intelligent and motivated. They have pushed me to perform at the very highest level of my abilities. They have taught me endlessly; every day I learn from them. My proudest moments are when I am able to return the favour. When a client considers me a trusted adviser, or a colleague comes to me with a complex problem, that is when I enjoy my career the most. It is what I like best about my career.
Paul C. McCoy
Partner
New York
101 Park Ave.
New York, NY 10178-0060
United States
+1.212.309.6220
paul.mccoy@morganlewis.com
www.morganlewis.com
Paul C. McCoy represents and counsels clients in the development of, and investment in, private investment funds and myriad customized private capital formation structures in all asset classes. Global leader of the private equity funds practice for Morgan Lewis, his clients include some of the world’s most prestigious funds of funds, global investment banks, US state government pensions, world leading private foundations, insurance companies, private equity-styled real estate funds and sovereign wealth funds.
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