Whilst the writer of this story may have evidence to show that hedge funds are retaining these so-called ‘jumbo directors’ to sit on their boards, the results of our survey – in association with Miller – would seem to suggest that very few so-called ‘jumbo directors’ sit as independent directors on the boards of funds managed by Europe’s largest hedge fund managers.
Nearly half (48%) of the firms surveyed said they seek to limit the number of directorships their independent directors can hold by restricting the number of fund management group relationships they can have; and of this sample size 60% said they restricted the number of relationships to 10 or fewer.
Of those firms (52% of those surveyed) who did not impose any sort of limit, only one firm said that it retained a firm of professional directors and most firms said their funds’ directors were directors on a relatively small number of ‘other’ fund boards. One firm said ‘we don’t use professional directors, our directors are only directors on our funds and, at most, one or two other funds.’ However, many of the firms surveyed acknowledged that investors were raising the issue of corporate governance in a way in which they hadn’t done so before. This suggests that investors are more aware of the importance of good corporate governance at the fund level which – roughly translated – seems to mean boards comprising directors with the right skill sets, and where there is a majority of independent directors who do not work exclusively as independent directors. Continuity also seems to be important; approximately 50% of firms surveyed said the composition of their fund boards had not changed in the last three years.
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