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After the last financial crisis a number of large investors in Cayman funds got together to demand changes in director regulation from CIMA. One of them was Greg Robbins of Mesirow. He was designated by a group of unhappy investors in Cayman hedge funds to write an open letter to CIMA.

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Given that every fund is different it follows that the risks they face are not the same either. But they all have some sort of risk and it is not clear that every board is on top of what these might be. Also, funds do need good risk management if they want to be sold in today’s heavily regulated environment. And good risk oversight helps attract investors as well as keep regulators at bay.

Following are some suggestions for what boards should do to improve their risk oversight:

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Will the extra expenditure and effort by regulated AIFMs on risk management prove to have been worth it when the next crash occurs? Do the increasingly large sums being spent on it by AIFMs, and by ManCo hosting platforms on behalf of the funds that they host, help investors or is this done mainly for compliance reasons?

There is no agreed concept of what is an appropriate level of risk oversight at AIFM level – over and above what is required by the regulators. But what regulators require is significant.

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As regular readers will know The NED has sought out information on the composition of 2,191 fund boards, across multiple jurisdictions, over the first half of the year. It was able to find details of the directors of approximately one quarter of these funds. The criteria selected above has been captured by The NED on these fund boards, as well as other information.

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A wave of consolidation is taking place in ManCo hosting business. Lawson Conner has just been acquired by SGG, a Luxembourg based service provider.

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