Protean Fraud Risk Appraisal, a London-based online risk certification company specialising in the alternative investment sector, is launching a hedge fund fraud risk certification service.

Protean Fraud Appraisal Certification gives fund managers the means to demonstrate that their fund represents a low fraud risk, thereby helping to renew investor confidence, the firm said. The certification process combines insurance risk underwriting and traditional due diligence techniques, along with a proprietary historic fraud loss analysis tool.

"The priority at this time for managers and investors alike is confidence. PFAC enables hedge fund and other managers globally to provide evidence that they are a low fraud risk, bringing increased confidence to both new and existing investors. PFAC is highly cost-effective and requires a minimal time investment by the hedge fund manager,” said Nathan Sewell, a partner at the firm.

"The certification supports the investment industry's gravitation to higher standards and best practice. Despite the increasing number of providers of investor due diligence, examination of hedge fund fraud risk has not played a role in the due diligence process to date as there has been no means to efficiently assess it. The approach developed by PFAC enables investors to use the certification as an integral part of their investment decision-making,” Mr Sewell added.

Protean Fraud Risk Appraisal is a subsidiary of Protean Investment Risks. PIR specialises in the provision of insurance products to protect investors against hedge fund fraud.