What are the primary reasons hedge funds buy this type of coverage?
There are three primary reasons for the coverage: • Most, if not all, suits against hedge funds are settled and the policy is used primarily to fund defense costs and indemnify the fund for these expenses, should the fund managers be indemnified by the fund. The coverage prevents a fund from needing to liquidate positions or use cash to pay for defense costs. • To give investors and service providers an extra degree of security and comfort. This broad coverage is an excellent selling point to potential investors. • To provide employment practices liability coverage to protect the firm against employee suits. You definitely need this coverage, • Optionally some funds buy the outside directorship liability module to provide additional protection in connection with the outside boards they serve on (non-profit, for profit).
