LiquidationGap® Insurance can facilitate the accelerated wind-up or liquidation of a private investment fund by providing insurance for exposures that would otherwise require reserves or holdbacks, enabling fund managers to make a final distribution to the fund's partners or interest holders.
LiquidationGap® is designed to provide fund managers with the peace of mind necessary to make a final distribution to the fund’s partners or interest holders without any concern about needing to “claw-back” distributions previously made.
Once a private investment fund has concluded its investment program and sold its investment portfolio, generally all parties have an interest in maximizing the amount of the final distribution and distributing as quickly as possible. However, general partners must decide whether or not to maintain cash on hand to cover contingent liabilities—no matter how remote—and what the amount of holdback should be. Such reserves or holdbacks can be an inefficient use of capital, and may preclude private fund investors and managers from generating the type of returns they expect.
LiquidationGap® Insurance is designed for liquidating private investment funds but can be modified to respond to liquidations of other entities. Coverage can also be extended to include heirs, assigns, estates, spouses, and domestic partners of the fund managers.
LiquidationGap® Insurance provides coverage for identified or unidentified contingent obligations which fund managers would otherwise account for by way of reserves or holdbacks.
LiquidationGap® Insurance can be particularly responsive where an existing contingency or outstanding indemnification obligation would prevent liquidation. Coverage can also include typical run-off management liability exposures, and specific exposures can be scheduled for cost and time efficiency.