Private Equity & Hedge Fund Errors & Omissions
Private Equity and Hedge Fund Managers face similar professional liability exposure as other financial professionals. The primary exposure for a fund manager is driven by unmet investor expectations. Poor performance, deviation from investment guidelines, and administrative errors are all potential exposures. In addition, misrepresentation and failure to disclose are areas getting increasing attention.
Professional Liability (or Errors & Omissions) policies are available for Fund Managers and protect from the above allegations. Underwriting is based on the Assets under Management (AUM) and other specifics of the particular fund.
Unlike other Professional Liability policies, underwriting may be very subjective and working with a broker that understands your business and the available markets is essential.
Professional liability policies for fund managers may include Directors & Officers Liability (D&O), although the primary exposure is the professional liability. Additional coverages include Technology/Media Liability and Employment Practices Liability coverage. Bonds, including fidelity and ERISA bonds, are also necessary coverages. General partnership liability coverage and protection outside the U.S. may also be important coverage provisions to many funds managers.
NAPLIA understands the Financial Industry and we are at the forefront of the constantly changing professional liability market that serves them. NAPLIA is recognized by the leading financial associations, including fi360 and CFDD, as the leading expert in Investment Adviser Errors & Omissions. And, as an independent agency we serve only the best interests of our clients. Why would you trust your practice to anyone else?
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What is a Hedge Fund?
Hedge Funds are a heterogeneous group of investment vehicles (usually structured as partnerships). Unlike Mutual Funds, Hedge Funds employ substantial leverage and hold both long and short positions with complex investment strategies—with the goal of achieving an absolute return (creating positive returns throughout all market conditions). The explosive annual growth experienced by Hedge Funds since 1988 has been the result of two key elements: 1) appreciation of assets; and 2) new money entering the industry. Since Hedge Funds first appeared as a highly profitable investment strategy (limited to only to accredited investors), they have been essentially free from SEC requirements that apply to similar investment vehicles (mutual funds). New SEC regulations effective February 1, 2006, require Hedge Funds to register as investment advisors under the Investment Advisors Act of 1940.
