Key person

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In a gaucher time called a key man, the key person — or people — are those in a small financial services organisation who provide the brains and nowse. In a hedge fund, these are the genius ex-Goldman trading whizz founding partners. As long as these two chaps — they tend to be chaps, though the revolution is coming — still show up for work and pulling down their colossal pay cheques, the future of the organisation is relatively assured. Should one of them or, God forbid both, gallivant off to their newly-acquired Caribbean islands to play with their respective collections of racing cars, they will leave behind a bunch of mediocre financial services hacks and bullshit artists with whom neither the fund’s erstwhile clients nor its trading counterparties will any longer wish to do business.

Hence the “key man” clause, entitling one to terminate a trading arrangement should the key man bugger off.

Negotiating a key man clauses can be a fascinating exercise in psychology versus risk management because, while they undoubtedly represent an Achilles heel for a hedge fund, they play so egregiously to the principals’ egos that most will be upset the not to be asked for one. There is no better validation of one's self-worth, after all, than to be told that without your continued personal involvement a training relationship is worthless.