Over the last year we have worked on a number of in-house roles for foreign investment funds in China. In this article, our consultant talks about the career path open to those lawyers after joining a funds legal team.

What do funds businesses look for in their lawyers?

Firstly, experience gained within the funds team of a law firm is a prerequisite in order to work in an in-house funds role.  Generally speaking, this is because these businesses need to compete within the market and be on par with the legal function of their clients, but also because they need lawyers with up to date practice experience. Therefore foreign investment funds are more likely to hire an experienced lawyer from the top international or Chinese law firms. Funds businesses look for lawyers to have project investment experience as a prerequisite. This is easy to find in candidates as many law firms have teams specialising in this. However, what really sets candidates apart and what funds really look for in their in-house counsel is fund formation/operation experience alongside project investment. This is more difficult to find in candidates from private practice, as while there are some law firms practicing in this niche area, it is not common. Therefore, lawyers with both sets of skills are in high demand.

As at multi-national corporations (MNCs), funds businesses look for candidates with commercial experience including communication skills, business insights and the ability to work with a wider business team. These in-house counsel do not need to be exclusive document drafters. They are expected to be the bridge between the investment team and the external counsel, to ensure that all the business requirements and benefits are reflected in the transaction documents by negotiating with the other parties and they look to control the business risks based on the internal policies.

On the whole, most foreign investment funds businesses in mainland China do not have large legal teams. They generally consist of one counsel or a small team with a legal head and a mid-level counsel. In order to protect the funds’ interests in every project, usually the ideal candidates for the legal head/sole counsel role will be required to have at least 6-7 years’ legal practice experience related to investment funds deals. This is in contrast to most domestic funds, who usually hire in-house counsel with 3-4 years’ experience. This is largely because negotiation and drafting skills are not in high demand for their daily roles.

The Career Path of the in-house counsel

As already mentioned, funds businesses generally only have a sole counsel or a small legal team. However, as specific legal skills are crucial, these businesses will often allocate more budget to legal salaries compared to that in the wider business. Having said that, since the number of opportunities is fewer, the competition is always fierce and clients will general have a good pool of candidates to choose from.

It is not often that a lawyer will move from one fund to another for the purpose of being an in-house counsel. This is because the role of a lawyer and the compensation that they receive will generally be fairly similar across the market. Also, we find that funds will favour an associate moving directly from a law firm because of their experience and the fact that they are often a lesser financial commitment. In addition, an in-house counsel from an MNC would also find it difficult to move to a funds business given that their business type, working environment and job scope are all quite different.

However, despite this working as an in-house counsel does present plenty of opportunities for progression and there are a number of routes these lawyers can take:

1. For in-house lawyers at domestic funds there might be the chance to make a move to the business side and join the investment team. In contrast, this move is rare for lawyers at foreign investment funds.
2. For an in-house counsel in funds, either foreign investment or domestic, some will choose to move back into private practice. The experience that they gain in-house often allows them to run their own investment funds practice within a law firm.
3. We also see lawyers moving to smaller funds as partners; often heading up legal and/or operations. While it is not easy for a lawyer from a foreign investment fund to move into the business side, some in-house counsel find that a move to a smaller scale funds business does present this opportunity.

In conclusion, the career plan of the in-house counsel in funds is quite different from that at MNCs. Lawyers with M&A and PE/VC experience will find they can easily move in-house at MNCs. However, those with PE/VC experience will find moving to a funds business much easier than lawyers with alternative experience. Once a lawyer has moved in-house to a funds business, the opportunities to move around within the market are not extensive. What is more likely is the chance to move to the business side, although not all lawyers are interested in doing this. On the other hand there is always the option of moving back into a law firm as the skills learnt in-house at a funds business are invaluable. But again this is not always an attractive prospect for many as not all lawyers want to return to the business development required at a law firm. Therefore, it is advised that before converting your career to a pure funds role you must consider what you are looking for in the longer term and where you want your career to go.