Focus remains on governance in fund industry
(CNS Business): Corporate governance remains an important factor for investors in hedge funds, according to a report by offshore law firm Walkers. In their outlook report for 2015 the firm said that the legacy of investor experiences in the wake of the 2008 downturn has led to an inevitable focus on this issue, as well as the greater use of independent directors on corporate boards. The firm said that investors and managers are looking for directors with depth of experience in the industry, with a mix of skills and different backgrounds, designed to complement those of the investment manager-nominated director.
“Investors are consistently paying greater attention to matters of operational due diligence and this is not limited to information from managers regarding their investment but is often needed by investors to fulfil their own regulatory obligations,†Walkers stated in the report, adding that due diligence questionnaires now routinely probe the policies of the manager and service providers.
“Transparency, meanwhile, remains key to investors and in the current climate, managers are tending to offer greater transparency in terms of reporting to all investors in order to meet these demands,†the lawyers stated. “The introduction of the Cayman Directors Registration and Licensing Law, which requires directors of entities covered by the law to either register or apply to be licensed by the Cayman Islands Monetary Authority, has given the regulator greater opportunity for more regular contact with operators of funds, thus increasing oversight and satisfying the calls of certain institutional investors.â€
The report based on a survey also demonstrated how funds are driving improvements in governance. “Looking at the service providers used to supply independent directors to boards, the trend is clearly towards split boards with a combination of independent and internal directors. In 2014, 65% of funds had directors from different firms, which was an increase from 57% in 2013,†the firm stated.
Single investor funds and managed accounts have also become increasingly popular again following the experiences of the 2008 crisis when lack of control over how liquidity issues and redemptions were managed. Some funds having to be unwound due to the actions of other investors making the single investor fund attractive. However, managers are not giving up on their efforts to attract as many investors as possible to their flagship fund to take advantage of greater economies of scale and lower operating costs,†Walkers revealed in the report.
Category: Finance, Financial Services
