Wednesday, August 6, 2008

Investor Fraud Insurance

This product is geared more to the hedge fund world and we have seen some traction mainly from the fund of fund and pension managers.

Protean (Lloyds), has launched a new product which provides protection from fraud for investors in hedge funds. Investors can either be individuals or companies (including fund of funds companies). This may be helpful to fund of funds, pension trust managers, or concerned investors within your fund. If any of your investors are looking for assurances this may be a product for them to explore.

The recommended limit would be set at the amount of the largest single fund investment in a portfolio. The approximate premium will be 20 basis points (0.2%) of the limit, yet this premium charge may be lower depending on the risk of the portfolio involved. For example, an investor has a $100M portfolio invested in 7 different funds. Of these 7 funds, 6 of the funds are investments of $14MM each and the 7th fund is an investment is $16MM. The recommended limit would be $16MM. The premium would be approximately $32,000 (20 bps on $16MM) or lower (could be as low as 4 bps, or $6,400 in this case) but will likely fall somewhere between $6,400 and $32,000.

Our client base, and this distribution list, includes fund of funds and this is most relevant to them, but we thought it would be valuable for our pure hedge fund clients to know this product is available. It may be useful when dealing with investors’ requests for your insurance limits and coverage. This could be a practical recommendation for a concerned investor if they are not satisfied with your own protection.

Feel free to contact me with any questions. 646-722-9347 or e-mail me at rick@maloyrs.com




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About the Author

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Mr. Maloy is the fifth generation of the family to lead Maloy Risk Services, which was founded in 1872 by his great, great grandfather Joseph Maloy. Based in Princeton and NYC, Mr. Maloy runs one of the oldest continually family operated insurance agencies in the country. Mr. Maloy retooled the agency in 1995 to focus on niche industry sectors providing risk management and insurance placement services to emerging growth companies in the Technology, Life Science, Venture Capital, and Hedge Fund industries. In 2004, Mr. Maloy created TriPro Managers, an insurance wholesale brokerage operation to augment Maloy Risk Services retail brokerage operations. TriPro Managers assists retail brokers in the placement of specialty professional liability coverage for the Technology, Life Science, Venture Capital and Hedge Fund industries. Mr. Maloy is a Certified Insurance Counselor, Certified Risk Manager and serves on the Board of Directors of the New Jersey Technology Council and is a past Alumni Advisory Board member of Wake Forest University. Mr. Maloy, is a member of Terrier Tri, a triathlon club in New York City. Mr. Maloy holds a BA from Wake Forest University.