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Continued focus on corporate governance with established
solutions now commonplace
As we continue to work on new investment fund launches,
consistent themes have emerged when it comes to board composition
for investments fund structured as companies. We are also seeing
creative solutions used for funds that are structured as
partnerships, and the issue of governance is increasingly becoming
an area of focus when clients decide whether to use a company or a
Key trends are:
Independent boards: typically made up of two
independent directors and one director from the manager.
Mixed boards: where the independent directors
come from different director service providers.
Due diligence in selecting the board: managers
increasingly explore different options, and conduct thorough due
diligence on directors including detailed face to face or phone
interviews. There is a growing choice of independent directors in
the market, ranging from leveraged models with an institutional
infrastructure, to niche providers.
Corporate governance formality: most funds now
have regular structured board meetings and many have governance
manuals in place. In part this derives from the Cayman Islands
Monetary Authority's Statement of Guidance on Corporate
Governance for Regulated Mutual Funds.
Many of these approaches have long been adopted by larger
managers but our extensive work with start-up managers confirms
that the same standards are now expected for investment funds
across the spectrum.
In the context of partnerships, the issue is highlighted in a
typical master-feeder structure, where it is common to use a
partnership for the master fund. Investors recognise that trading
occurs at the master fund is, and independent oversight at this
level has become increasingly important to them.
Some solutions for creating independent oversight for
establishing the general partner of the partnership as a Cayman
company with its own independent board;
where the general partner is a Delaware LLC (which is the more
normal approach for US managers), establishing an advisory
committee or review committee matching the board at the feeder
level, or creating more formality around the general partner itself
with a more detailed operating agreement and decision making
resting between the principal of the investment manager, and then
two independent persons.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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