Frequently Asked Questions
Question: What are the typical claims made against hedge funds?
Answer: Typical claims made against hedge funds, investment advisers, and their respective directors/partners/members include:
- Mismanagement
- Misstatement
- Negligence
- Misrepresentation made in the PPM or other communication
- Fraud
- Breach of duty
- Failure to supervise the investment adviser
- Failure to perform adequate due diligence in evaluating potential investments
- Failure to provide adequate disclosure of the investment risks
involved
- Investing in assets or using strategies not mentioned in the PPM
- Failure to follow investment guidelines
- Failure to properly value assets
- Failure to invest
- Failure to redeem investor funds in a timely and orderly manner
- Manipulation or misrepresentation of historical performance
- Excessive fees
- Contracting with substandard vendors/submanagers
- Conflicts of interest / related party transactions
- Claims against individuals serving as directors on the boards of
portfolio investments
- Claims by the SEC or state attorneys general or other regulatory body alleging violations
of rules or statutes. It is important to note that coverage
under some E&O/D&O policies can only be triggered by the filing of a notice of charges, formal investigative order or similar document.
- Market timing / Late trading
- Claims made by employees alleging discrimination, sexual
harassment, or wrongful termination
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