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Alternative Market Briefing

Hedge fund insurance becomes more prevalent as uncertainty reigns

Tuesday, January 15, 2013

Bailey McCann, Opalesque New York:

Hedge fund manager insurance is not something that may immediately spring to mind as a consideration either on the part of managers or investors during a due diligence process, however, it can be a way of mitigating key man risk. According to Paul Grassi, head of the Hedge Fund Insurance group, at Wells Fargo hedge fund insurance has evolved since its earliest iterations in response to the financial crisis and investor demand. Grassi recently spoke to Matthias Knab about hedge fund insurance for Opalesque TV.

"The policy provides defense and indemnity protection in case there is a settlement of some sort. In addition, there are other exposures that they may have - crime from employees, kidnap and ransom exposures, all kinds of things that in fact impact them as they are traveling throughout the world meeting investors and providing advisory services," Grassi explains.

Hedge fund insurance is relatively new, Grassi set up his group with Wells Fargo in 2004. However, as managers travel and do business in a generally high-risk world, the protections afforded by carrying a policy are timely. So far, many of the major insurers, such as Travelers or Chartis have some version of the product available.

"You want to make sure that the limits are adequate, which is more or less a function of what the assets under management are," Grassi says. He furt......................

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