In the competitive landscape for top investment professionals, negotiations between star portfolio managers and major hedge fund operators are increasingly focused on securing protection clauses against broken promises and guarantees related to spinouts. 

Dan Hunter, co-head of Schulte Roth & Zabel’s Investment Management Group, spoke with Hedge Fund Alert on the increase in protection clauses, including break fees, saying he’s witnessed a half-dozen recent examples of fund operators including penalties of between $200,000 and $1.5 million in contracts. “My understanding is once the firm starts asking for the break fee, they ask it across the board for any position, not just a trading role,” Dan said. 

Similarly, there has been an increase in spinoff agreements, with proven, profit generating portfolio managers insisting on contract clauses that compel firms to back them should they decide to spin out independently after a specified period. Spinoff clauses are often contingent on meeting specified performance benchmarks.  

Dan noted that although spinout agreements were traditionally the domain of large multi-strategy shops, they are now being adopted by single-manager sector funds and startups seeking to attract top investment talent from larger, multi-strategy rivals. 

In his latest article for The Bankruptcy Strategist, “Third Circuit Sides With Magistrates On Bankruptcy Appeals,” Schulte Roth & Zabel of counsel Michael L. Cook explains the Third Circuit’s recent MTE decision, 2025 WL 5682927 (3d Cir. May 7, 2025) (on consent of parties and referral by district court, “a Magistrate Judge may enter a final judgment in a bankruptcy appeal”). The court overruled its previous 1983 decision that had been relied upon by the Seventh and Fifth Circuits (district courts lacked authority to refer a bankruptcy appeal to a magistrate).

The bankruptcy court in MTE had granted summary judgment for the defendant. When the plaintiff appealed to the district court, the parties “consented to proceed before a magistrate judge for all proceedings, including final judgment.” Relying on 28 U.S.C. §636(c), the magistrate affirmed the bankruptcy court’s judgment, and the Third Circuit affirmed the magistrate’s jurisdiction, creating a split with the Fifth and Seventh Circuits.

Read the article.

A proposed litigation funding tax levy was removed from the Republican tax and spending deal by a Senate referee who ruled that the proposed tax was not compliant with the expedited procedure Republicans were using to pass the legislation. The removal of the levy is a victory for litigation funders and the growing business of litigation finance.  

As noted in the Bloomberg Law article, “Litigation Finance Levy Cut From Tax Bill by Senate Referee,” an analysis of the bill by Schulte lawyers said the real tax rate for funders could reach as high as 65% when accounting for taxes paid when distributing earnings. Our lawyers noted, “There is little precedent for the establishment of an entirely new income tax system dedicated to a particular industry.” 

Read Schulte’s analysis of the bill. 

The recent $10 billion sale of the Los Angeles Lakers has sparked speculation from at least one activist investor as to whether the New York Knicks could sell for more, but any sale would need to be initiated by shareholders. 

Ele Klein, chair of Schulte Roth and Zabel’s Global Shareholder Activism Group, recently told Front Office Sports that “there are not that many opportunities for activism in sports.” 

Ele explained “In controlled companies, the approach is to try making them feel guilty through public campaigns. It’s always a risky proposition because there’s no direct path to success.”