Directors of offshore hedge funds often lack qualifications for the role and are unable to provide adequate governance of these investment vehicles, argues a new report.
Directors of offshore hedge funds often lack qualifications for the role and are unable to provide adequate governance of these investment vehicles, argues a new report, coming at a time when the industry continues to face mounting regulatory pressure.
In a white paper produced by the independent consultants HedgeDirector, the report argues that hedge fund investors must demand professional standards of oversight from the offshore boards of such funds.
HedgeDirector’s founder, Kevin Ryan, argues that the reforms being enacted in traditional fund governance, following the Walker report in the UK and Dodd-Frank Act in the US, should equally be applied to the world of alternative investments.
Ryan says that as institutions, such as pension funds, allocate a greater percentage of their portfolios to hedge funds, they have to demand the same "best practice" governance from their hedge fund boards as they do from their traditional investments.
Among its key themes, the report discusses the continued prevalence of conflicted non-executive directors who are supplied by the hedge funds’ offshore service providers, or their affiliates.
“This practice gives rise to the perception that the non-executive directors are merely rubber-stamping the decisions of the fund manager, and not operating freely in the best interests of the fund and its shareholders,” according to a statement about the report.
To view the white paper in full, click here.