Tag Archives: hedge fund style drift

Thinking about Hedge Fund E&O insurance?

If so, you better be aware of any potential liabilities against your organization. In an action against a hedge fund insurance company, an insured investment adviser lost in a claim against the insurance company for $5 million in losses. The reason the investment adviser lost the claim is, centrally, because they should have revealed to the insurance company that they could be subject to future suit. The actual reason for the suit was because the investment adviser took on leverage in excess of the limits which were disclosed in the fund’s private placement memorandum. This situation again highlights the perils of hedge fund style drift and/or improper disclosure of the proposed investment program within the private placement memorandum.

The case is:MDL Capital Management v. Fed. Ins. Co., (W.D. Pa. July 25, 2008).