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From Kirsten Bischoff, Opalesque New York:

The recent headline making struggles of some hedge funds have highlighted the growing minefield of legal risks that come with running a fund. Many hedge funds that survived 2008 and the first half of 2009 were forced to make decisions they never considered would become realities. Gating investor assets, creating side pocket vehicles for illiquid securities, etc., were some of the survival tactics taken by managers, most of which acted in ways they felt best protected their entire investor base and their funds.

Insurance covers investor lawsuits… “In this day and age, as hedge funds have had to gate assets, lawsuits are going to be coming from disgruntled investors or groups of investors, and an insurance policy would be triggered by such a suit,” says Neil Levy (nlevy@cbscompass.com ), a New York-based CFP, CPA, who works with CBS Coverage Group to provide hedge funds with such insurance coverage.

This example was in evidence this week as investors in Texas-based Highland Capital unleashed a lawsuit on the firm arguing that redemption and withdrawal levels were misrepresented. The firm, which has already attempted to use a mediator to find a middle ground between investor demands and manager actions said ......................

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