Hedge fund investors offered fraud insurance

Hedge fund investors now have the ability to insure themselves against fraud or even the allegation of fraud.
JUL 01, 2008
Hedge fund investors now have the ability to insure themselves against fraud — and even against the allegation of fraud. Hedge Shield, offered by Integro Insurance Brokers Ltd. in New York, is matching due diligence with an insurance policy that protects investors in the event a hedge fund has its assets seized by the government based on allegations of fraud. “Nearly 85% of hedge fund meltdowns over the past 10 years have had elements of operational weakness which could invite fraud,” said Roger Egan, Integro chief executive. The Hedge Shield program, which is underwritten by several participating insurance companies, also relies on the research and due diligence of Amber Partners (Bermuda) Ltd., a Hamilton -based operational risk certification firm. The four key areas of focus are overstatement of net asset values, theft, concealment of trades and false claims of assets to which the fund does not have title. The Hedge Shield policy is unique, according to Mr. Egan, because it is designed to protect the investor as opposed to simply insuring the fund. Under the terms of the insurance contract, once a fund’s assets are seized, investors will be reimbursed for their principal investment within 90 days. Regarding the added costs associated with this kind of insurance policy, it is viewed more as a risk management tool, according to Reiko Nahum, chief executive of Amber Partners. “The risk of fraud is very real and Hedge Shield provides a very effective means to eliminate risk,” she said. “It’s really a hedging tool.”

Latest News

Merrill lands four advisor teams as May recruiting data shows firm's two-way churn
Merrill lands four advisor teams as May recruiting data shows firm's two-way churn

Merrill's latest hires span Colorado to Louisiana, even as industry-wide recruiting data suggests the firm is losing almost as many advisors as it gains.

Fund manager sues Kandeo, alleges $100 million FinSocial loss
Fund manager sues Kandeo, alleges $100 million FinSocial loss

The $36 million buy allegedly hid inflated books and a $50 million diversion.

Advisor gets $200,000 from Ameriprise in 'emotional distress' lawsuit
Advisor gets $200,000 from Ameriprise in 'emotional distress' lawsuit

“An award citing emotional distress is very unusual,” an industry executive said.

Workplace financial education linked to stronger financial habits, but participation remains low
Workplace financial education linked to stronger financial habits, but participation remains low

New EBRI research found workers who participated in employer financial education reported higher confidence, literacy and financial satisfaction.

The rise of the super advisor: How AI is redefining competitive advantage in wealth management
The rise of the super advisor: How AI is redefining competitive advantage in wealth management

Beyond operational excellence, the winning advisors of the future are the ones who can reach across multiple disciplines without discarding specialist skills.

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income