Corporate governance driving growth for independent directors
Cayman Net News (Monday, March 27, 2006)

With the high profile fallout of Bayou Group hedge fund as well as other corporate scandals like Enron and WorldCom there is an increased emphasis on corporate governance.

Investors are now looking for independent directors for hedge funds, which can provide the kind of assurance they are looking for that best practices are in place for good corporate governance according to Allison Nolan, Managing Director of Athena International Management.

“One of the most significant recent trends in the hedge fund industry is that all parties involved are now focusing on the issue of corporate governance,” said Ms Nolan. “In previous years the primary consideration in appointing an independent director of a hedge fund tended to be to maintain the offshore tax status of the fund or to assist in the tax planning of the investment manager and less attention was paid to the expertise of the particular independent director appointed,” she said.

 “However, following recent hedge fund litigation and scandals and the resultant increase in onshore tax and regulatory scrutiny, promoters, investors and regulators now expect a higher level of sophistication and experience from the independent director of a hedge fund.

The availability of independent directors of a high calibre is therefore key in maintaining Cayman’s dominance in the global hedge fund industry.” Ms Nolan added that independent directors have become so important to the hedge fund industry that investors are frequently paying a premium for hedge funds, which have reputable directors acting.

There have been several businesses that are beginning to offer director services in response to the growing demand. Although some independent directors are voluntarily applying for a license with Cayman Islands Monetary Authority (CIMA) there is no current requirement. Some financial professionals have said there should be some regulation over this industry in Cayman, because of its growing importance to the hedge fund industry.

However, CIMA officials have indicated there are no current plans for license requirement. It is estimated that hedge funds make up $1 trillion worldwide with Cayman dominating the market with 80 percent and it is expected to grow to $1.5 trillion in the next two to five years.

She said the industry in Cayman will continue to grow, but it will also depend on maintaining the sophisticated financial infrastructure and reputable service providers. Ms Nolan was formerly a partner at Appleby Spurling Hunter, which specialised in structured finance, investment funds and corporate services. She recently formed Athena International Management, which provides directorship and other corporate services.

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Based in the Cayman Islands, Athena International Management Limited is a sophisticated offshore provider of directorship services, primarily to the investment funds and structured finance industries, together with a comprehensive range of corporate services. For more information visit www.athena.ky