In the AIF world, you are often betting on the jockey, not just the horse. Key Man Risk refers to the danger that the fund’s success is heavily dependent on one or two critical individuals (the star fund managers). If they leave, retire, or pass away, the fund’s performance could suffer.
To mitigate this, SEBI and savvy investors insist on “Key Man Clauses” in the fund documents. These clauses might suspend the fund’s investment period or allow investors to exit if the key person departs. ItÕs a reminder that human talent is the most valuable asset in private markets.
