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Alternative Market Briefing

Study reveals that current practices in fund governance are falling short of ideal

Tuesday, May 08, 2012

Beverly Chandler, Opalesque London: A study published earlier this year examined the data on Cayman domiciled funds to get an indication of governance practices and found that 31% of funds do not have any external directors. 'Fund Governance at a Crossroads: Current Industry Data and Recommended Best Practices’ was compiled by Sound Fund Advisors (SFA), a consultancy firm founded by Jonathan Morgan to provide directorship services to asset management firms and institutional hedge funds.

His paper, referred to in Opalesque, was based on the SEC data from 2,315 Cayman domiciled funds. The study found that 31% of funds have no external directors and for funds that do have external directors, the most common configuration is one internal director and two external directors.

SFA’s study also found that US manager practices lag the UK and other Commonwealth countries where boards are more likely to be diverse and have a majority of external directors. Morgan’s report says: "In cases where funds with a US investment manager have two external directors, 74% have directors that work for the same firm – undermining much of the benefit of having multiple directors".

The study found that most popular professional directors are handling hundreds of funds – the top 40 sit o......................

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