Hedge Fund Directors Are Useless, Most Investors Say

Approximately 31% thought that the number of fund directorship positions should be capped at 15, while 24% wanted a nine-directorships cap.

Corgentum noted that this challenged previous industry research that had shown a higher investor tolerance for more board positions.

The survey found that 63% of respondents thought the most important function of a director was to serve as an investor watchdog.

Again, this was contradicted the realities of hedge fund investing, Corgentum said, in that directors have virtually no ongoing interaction directly with fund investors.

Seventy-one percent of investors and operational due diligence analysts surveyed felt that directors should be held personally liable if a fund failed for operational reasons.

Corgentum said this finding builds on court decisions such as the Weavering case, in which the Grand Court of the Cayman Islands found two former directors of the failed Weavering Macro hedge fund guilty of willful neglect or default in the discharge of their duties.

In an interview with Hedge Funds Review, Scharfman noted that survey data had showed many investors were either not researching or were under-researching directors.

“This represents a significant missed opportunity to increase their understanding of the governance mechanisms in place at funds,” he said. “Through operational due diligence, investors and operational due diligence analysts can separate the better directors from the pack.”