Kirkland & Ellis is all in on private equity. Not only did it become the world’s highest-grossing law firm in part by advising private-equity clients through an industry super-cycle, but for a long time its partners have been investing in a range of internal pooled investment funds that buy into private equity funds. In some instances, the vehicles have actually bought into specific deals in which Kirkland is advising the buyside.
In the past 12 years, Randolph Street Investment Partners, the law firm’s low-profile fund manager, has sought to raise more than $1 billion from Kirkland partners to invest in client funds and deals. These internal funds are among the largest in the legal profession.
As Kirkland has grown alongside the buyout industry over the years, the scale of those funds has steadily grown as well. In 2010, for instance, the fund sought to raise $20 million with a minimum investment from each participating partner of $10,000. For 2021, Kirkland was looking to raise a much more substantial $325 million from its top lawyers across two different vehicles.
According to Kirkland’s conflicts of interest disclosures in court filings, the firm’s investment entities have no management or other control rights over the funds they invest in. It’s completely legal for lawyers to participate in these investment programs, and longstanding legal ethics rules are in place to deal with potential conflicts of interest.
The chance to share in the profits that the firms they advise make is a big recruiting tool and a key way to attract the best lawyers these days, when competition for talent among elite law firms is perhaps fiercer than ever.
The fact that Kirkland is aligned alongside their clients in their investments can also be a big selling point for clients, as they can be sure that the firm is interested in their success on multiple levels. This no doubt contributed to Kirkland being the top legal adviser on private equity deals in 2021, when it advised on $278 billion in transactions.
Despite the large amounts of money involved and the potential for conflicts of interests, there has been no suggestion of wrongdoing in connection with the practice. The firm has noted in court filings that—as is typical for limited partners in buyout funds—its employees don’t “manage or otherwise control” the funds they invest in and have no influence whatsoever over decisions “to buy, sell, or vote any particular securities.”
Kirkland pioneered the arrangement in the 1980s, when private equity was just beginning. The firm itself does not invest in these funds and it is up to each partner to decide whether they wish to participate.