Hedge fund investors offered fraud insurance

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NEW YORK – 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 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.

The Hedge Shield programme is underwritten by several participating insurance companies and relies on the research and due diligence of Amber Partners, a Hamilton-based operational risk certification firm. The policy covers overstatement of net asset values, theft, concealment of trades and false claims of assets. Under the terms of the contract, following the seizure of the firm’s assets, investors are reimbursed their principal investment within 90 days.

The product is unique in that it was developed to protect the investor rather than insuring the firm. Says Integro chief executive Roger Egan: “Nearly 85% of hedge fund meltdowns over the past 10 years have had elements of operational weakness that could invite fraud.”