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The Standards Board for Alternative Investments (“SBAI”) recently published a new memo on indemnification wording, as part of its Governance Toolbox.
This memo provides an informational overview of indemnification wording, which is used by most funds in their governing documents. Indemnification clauses are crucial to investors, as they highlight circumstances that may require a fund to reimburse the asset manager for losses related to the investment management of the fund.
Craig Dewberry, Partner and Operational Due Diligence Analyst at Albourne Partners said, “A robust and clearly written indemnification clause can provide comfort to an investor that this indemnity will only be relied on in appropriate circumstances. As such, investors should review this language as part of their initial due diligence processes to understand the implications of the specific way that it has been worded. This Toolbox memo is an important tool to help investors understand potential implications and due diligence questions they should be asking.”
Please click here to read SBAI’s full press release.