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Frequently Asked Questions

Question: We have been asked to participate in a conference call with an E&O/D&O underwriter.  What questions are they likely to ask?

Answer: It is not unusual for E&O/D&O underwriters to ask for a conference call with hedge fund principals. Such conference calls may be requested in connection with a new business application or when renewing an existing policy. The call is normally scheduled after the underwriter has reviewed the application and all the supporting documents. The call gives the underwriter a chance to ask follow-up questions, obtain the very latest information on fund performance and strategy, and to get a feel for the way the fund is managed.

Here are some questions an underwriter asked one of our clients during a recent conference call:

• Firm Overview, Background, and Organizational Structure
• Overview of Funds: number of funds, new funds, liquidated funds, closed funds, updated status on Fund X
• How many side agreements do you have? Does the fund’s board approve side agreements?
• Net flows ($ amount of subscriptions and redemptions past year)
• Have you had any change in service providers over the past year (auditor, administrator, prime broker, legal counsel)
• Provide commentary on the economic landscape and impact of financial market dislocation on the business. Address fund performance, leverage, liquidity, counterparty risk, and redemptions. A reflection on 3rd Q2008, 4th Q2008 and outlook for 1st Q2009 will be important
• Describe communication to investors over the past year
• Describe the level of investor dissatisfaction/satisfaction and how the relationships were managed over the past year
• Provide an update on portfolio holdings (including percentage for each type)
• Provide an update on compliance/internal audit and results from any reviews undertaken during the past year
• Explain any changes to investment due diligence process
• Has the firm been the subject of any investigations or inquiries of any kind by any regulator in the past year?
• What is the firm’s plan and strategic outlook for 2009 into 2010?