Strengthening Fund Governance: Developments in Fund Governance and the Role of Directors

June 09, 2014

Investor concerns and expectations and recent market events have resulted in increased focus by investors, regulators and investment managers on legal standards and market practices relating to fund governance — that is, the system of rules, practices and processes by which funds are directed and controlled.  A renewed focus on fund governance and, in particular, the role of directors, has developed in response to a number of market developments, including:

  • Significant market disruptions in the course of the financial crisis in 2008 during which boards of many hedge funds imposed gates and suspended redemptions.
  • The 2011 decision of the Cayman Islands Grand Court in Weavering Macro Fixed Income Fund Limited v. Stefan Peterson and Hans Ekstrom (“Weavering”) and that court’s 2008 decision concerning the failure in 2007 of the Bear Stearns Cayman Islands hedge funds.
  • Recent U.S. Securities and Exchange Commission (SEC) actions against the current and former board members of certain U.S. registered investment companies.

Fund governance schemes vary greatly from jurisdiction to jurisdiction and across different product types due to varying local regulatory schemes and product structures.  This outline discusses key features of and developments in fund governance standards and related considerations, including: (i) current governance and other key investor protection requirements and standards applicable to retail and private funds in the European Economic Area (EEA), Asia, the Cayman Islands and the United States, as applicable; (ii) developments in expectations and standards for fund directors; and (iii) recent regulatory developments in the EEA and the Cayman Islands.  We also discuss significant themes we have observed are currently developing relating to fund governance.

Click here to download the full outline.