Key Person Risk
Key person risk is the dependency of a strategy on one or a few individuals whose departure could impair performance or operations.
Definition
Key person risk describes the vulnerability of a fund or strategy to the loss, reduced involvement, or unavailability of critical individuals. It is especially relevant when investment outcomes rely heavily on a founder, lead portfolio manager, or small team with unique sourcing or decision authority. Allocator Context Allocators evaluate key person risk through team structure, decision processes, succession planning, and the presence of institutional infrastructure. Emerging managers often face heightened scrutiny because the platform may be less resilient to personnel changes. Decision Authority Key person risk is commonly reviewed during diligence and can be embedded in fund terms through key person clauses, which may restrict investments or trigger suspension events if key individuals depart or reduce involvement. Why It Matters for Fundraising Allocators want confidence that performance is not “single-threaded.” Managers who can show delegation, documented process, and credible succession planning reduce risk perception and improve allocation likelihood. Key Takeaways Key person risk is a common allocation blocker Team resiliency matters as much as talent Often addressed in fund terms Clear structure and succession reduce friction