New Insurance Products Promise to Protect Investors From Hedge Fund Fraud

Two new insurance products offer to cover investors in hedge funds in the event of fraud or alleged fraud on the part of hedge fund managers or employees. Both offer novel coverage structures, and employ creative mechanisms to combat the twin problems of moral hazard and adverse selection. If the products are successful, they may, at the margin, help persuade various risk-averse money managers and institutional investors to invest in hedge funds.

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