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Hedge fund governance standards exposed

The NED has recently obtained the governance details on over 5,000 hedge funds, from their Form ADV filings with the SEC. It shows which directors are on what boards and much else. The NED can now do accurate analysis on the governance arrangements of the hedge fund industry.

The data is sourced from Castle Hall’s DiligenceExpress tool, which enables investors to analyse information extracted from the SEC’s Form ADV.

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A desperate need for local expertise

Much more local expertise on boards of funds domiciled offshore is probably the only way that managers will be able to continue to operate there without incurring a substantially greater tax liability. 

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Independents: how useful are they?

Over the last few months The NED has been involved in a number of discussions that have questioned the value of independents on boards. At the same time the age-old debate of who is, and is not, actually independent seems to have returned.
For example, speakers at a recent Irish fund event said it’s possible to have too many independents on boards. Their lack of inside knowledge can slow decision-making and they often need to rely on outside advice, it was said.

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The growing work burden

Regulations coming in across multiple jurisdictions will mean much more work for local directors. This is driven the EU’s Code of Conduct Group, BEPs and related tax changes that will require funds to show that they have real substance in the jurisdiction where their funds are domiciled.

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Expert Fund Boards

The NED’s first listing of Expert Fund Boards, based on its Board Composition Capability Rating (BCCR) starts this month. This Expert Fund Board listing will be a regular part of each monthly issue of The NED.

As mentioned in the October issue The NED has begun rating fund boards.  It is doing to help investors. We would like to steer them towards funds competent boards. Not every investor is of sufficient size to employ its own due diligence team to do this for them, or has the time to do it themselves.

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