Hedge fund boards need to clarify scope of duties, says RFG
A careful assessment of a hedge fund board's role can help ensure alternative fund investors receive governance benefits that justify board expenses, according to a white paper by The Regulatory Fundamentals Group (RFG).
The paper, "The Unasked Question: Fund Directors – Worth It or Not? Why Alternative Funds Are Not Receiving the Value They Should from Their Directors," highlights key questions not being asked about the fund governance process.
A chief conclusion is that investors and managers who fail to address these issues may not derive sufficient value from their boards.
RFG's paper comes at a time when institutional investors, including pension plans and endowments, are increasing their allocations to alternatives and beginning to scrutinize fund governance more closely.
"Operational risk can sink a fund, but who has responsibility for mitigating operational risk – the manager or the board?" asks Deborah Prutzman, chief executive of RFG. "If this is not clear, investors should justifiably ask, 'Who is steering the ship?'"
Prutzman notes that many jurisdictions, such as the Cayman Islands, consider fund boards to be a "best practice," which may include having a complement of independent directors.
"Regardless of whether directors are specifically required, investors deserve a clear articulation of what a board is paid to do and how the board intends to achieve its objectives," says Prutzman. "Transparency with respect to fund portfolios is now the norm. Transparency in governance should be equally valued."
- Special Reports
- By Location
- Asian Hedge Funds
- BVI Hedge Fund Services
- Bermuda Hedge Fund Services
- Canada Hedge Fund Services
- Cayman Hedge Fund Services
- Channel Islands Stock Exchange
- Future of offshore funds
- Gibraltar Hedge Fund Services
- Guernsey Hedge Fund Services
- Hedge Funds in Germany
- Hong Kong Hedge Fund Services
- Ireland Hedge Fund Services
- Isle of Man Hedge Fund Services
- Jersey Hedge Fund Services
- Jersey Private Equity Services
- Latin American Hedge Funds
- London Hedge Fund Services
- Luxembourg Hedge Fund Services
- Malta Hedge Fund Services
- Middle East Hedge Fund Services
- Singapore Hedge Fund Services
- South African Hedge Fund Services
- Spanish Hedge Funds 2008
- Switzerland Hedge Funds
- US East Coast Hedge Fund Services
- US Hedge Fund Services
- By Subject
- Conference reports
Latest Special Report
- By Location
- How to set up a hedge fund