Stanley Druckenmiller’s Counsel Provides a Tutorial for Negotiating Exculpation, Indemnification, Redemption, Withdrawal and Amendment Provisions in Hedge Fund Governing Documents

Gerald Kerner, general counsel of Duquesne Family Office LLC, and former general counsel of famed investor Stanley Druckenmiller’s Duquesne Capital Management, L.L.C., recently drafted a white paper, the general thesis of which is that hedge fund investors pay insufficient attention to certain “boilerplate” terms in fund documents – terms that, in practice, can have important consequences for the economics of an investment.  In the first instance, the white paper recommends that hedge fund investors negotiate such boilerplate provisions – and walk if the manager refuses to engage in productive dialogue.  The white paper then offers specific recommendations for hedge fund investors when negotiating exculpation, indemnification, redemption, withdrawal, amendment and other provisions.  The white paper incorporates the wisdom accumulated by Kerner over years negotiating the deployment of capital by one of the hedge fund industry’s leading lights.  Its insights can tangibly impact the way investors approach negotiating with managers, and vice versa; the white paper, therefore, is illuminating reading for both constituencies.  This article summarizes the recommendations in the white paper.

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