Hedge Fund Governance

DedicationBiographyPreface1: Introduction to Hedge Fund Governance Abstract Introduction to the concept of governance Why should investors care about hedge fund governance? Governance: a vague concept? How should investors think about hedge fund governance? What hedge fund entities are investors looking at to promote good governance? Distinguishing between governance and due diligence Is governance controlled by the hedge fund board of directors? Governance outside of hedge funds The origins of hedge fund governance lie in corporate governance Historical perspectives on corporate governance Investor-driven governance Defining hedge fund governance A universal definition of governance? Is governance defined by perspective? Who is responsible for hedge fund governance? Is governance primarily an investment-related concept? Distinguishing between governance and hedge fund activists Hedge fund governance: a working definition 2: Hedge Fund Board of Directors: A Governance Proxy? Abstract Introduction to the hedge fund board of directors Are vitriolic director criticisms merited? Clarifying a modest proposal Understanding hedge fund board structures Offshore versus onshore hedge funds Different types of hedge fund boards Clarifying director terminology A brief history of hedge fund directors The forgotten master fund board Who are these board members? The expanding director talent pool—a blessing and a curse? Who decides who gets to be on the board? You’re not who I hired!—the “associate director” bait and switch? Director compensation—a double standard? What do directors actually do? Director liability—a few words about indemnification Director delegation 3: Regulatory Governance of Hedge Funds Abstract Introduction to regulatory governance A few words on what this chapter doesn’t cover Why so many jurisdictions? Why the increased focus on the importance of offshore regulations? Leading hedge fund regulators Perspectives on global hedge fund regulatory development How do regulations relate to governance? Key fund regulations and their effects on governance Hedge fund regulatory governance in other jurisdictions Conclusion 4: The Role of Fund Service Providers in Implementing Governance Abstract Introduction to hedge fund service provider governance Are some service providers more important to governance? Isn’t casting a broader net better? Are “ancillary” service providers important in evaluating governance? Common hedge fund service providers Isn’t service provider governance simply fund operations? The administrator’s governance role Custodian and prime broker governance Additional comments on fund directors and governance Gauging individual service provider quality and weight in external governance Conclusion 5: Hedge Fund Internal Governance Mechanisms Abstract Introduction to hedge fund governance mechanisms Why are hedge funds now talking about governance? Is the JOBS Act good for hedge fund governance? Does enhanced flexibility promote better governance? Is technical compliance enough for good governance? I said governance, didn’t I? Governance mechanism classification challenges Hedge fund internal governance by committee? Hedge fund capacity as a governance indicator Third-party operational control audits as governance proxies? Conclusion 6: Developing a Framework for Investor Analysis of Hedge Fund Governance Abstract Introduction to developing governance analysis frameworks Do strong operations imply good governance? Is governance a moving target? Institutional investor governance: the CalPERS model Classifying governance analysis into two camps: investment and operational Developing a governance program Understanding governance evaluation standards Beginning governance assessments Analyzing director governance Governance analysis of service providers continued Governance analysis continued—audited financial statements examples Governance analysis continued—business continuity examples Information technology governance reviews Conclusion 7: Investor Activist–Driven Governance and Ongoing Monitoring Abstract Introduction to ongoing monitoring and activist-driven governance Do ongoing governance evaluations add value? Ongoing governance monitoring information decay considerations Developing an ongoing governance monitoring program—a meta-analysis program? Beginning ongoing governance assessments Ongoing governance monitoring—information technology examples Bonus board governance oversight bonanza? Don’t worry, we’ve hired someone for that Ongoing background investigation and news monitoring for funds, personnel, and directors? The good guy problem: do “house views” result in weakened ongoing governance oversight? Fast and furious—increasing governance monitoring frequency through shallow dives Governance activism Alternative activism in action ESG, SRI, and faith-based investing Conclusion 8: Case Studies and Example Scenarios in Hedge Fund Governance Abstract Introduction Case studies Example scenario: “the Sark Lark”—are certain jurisdictions’ regulatory governance regimes completely ineffective? 9: Analyzing Governance in Fund Valuations Abstract Introduction to analyzing governance in fund valuations What does valuation have to do with governance? Hedge fund valuation governance considerations Service provider valuation governance considerations Historical perspectives on hedge fund valuation governance—the Lipper example 10: Field Perspectives on Governance—Interviews With Those Involved in Various Aspects of Hedge Fund Governance Abstract Interview with Ms. Heather Smith, Cayman Islands Monetary Authority Interview with Mark Cook and Geoff Ruddick (International management services ltd.) Interview with George Bashforth of Appleby Trust (Cayman) Ltd Interview with Ingrid Pierce of Walkers Global Interview with Professor Joe Bannister and Dr. Chris Buttigieg of the Malta financial services authority Interview with Adam Cohen of Perella Weinberg Partners Interview with Louis Rodriguez (operational due diligence professional) Perspectives on transparency: additional interview comments 11: Good Governance in Bad Situations: Understanding Governance During Fund Turmoil and Liquidations Abstract Introduction Background on fund liquidations Is a closure and a liquidator the same thing? Common reasons hedge funds close Governance perspectives on liquidations Conclusion 12: Trends and Future Developments Abstract Introduction The diligence governance correlation Continued expansion of the definition of hedge fund governance Increased implementation of boards where they are not mandated by law Regulatory database management of board of directors Increased regulatory scrutiny and prosecution of governance-related issues Increased director reporting but not necessarily meaningful transparency The future rise and fall of annual governance meetings (“AGMs”) Increased focus on director disclosures to investors Increased focus of director conflict management Global governance codes—a self-regulatory pipe dream? Further broadening of scope of director services Index