Fund Management - Updates, News and Advice

Guide to Non Exec

May 2, 2015

I have recently contributed in the update of the Fund Directors Guide published by AIMA on 29th April 2015 for Non-Executive Directors (NED). The initial version was published early in 2008 and I hope the new version will not be a prelude to another financial crisis (however it could- let’s save that for another day)

It is only when you compare the 2008 version (36 pages) to the 2015 version (80 pages) that you realise not only the importance of the role but also the need for aspects of the role which might have been there but where taken maybe for granted. It has also as a guide become more worldwide in its coverage which reflects the development of the nuances of the different financial markets and their regulation to international capital flows. A matter which may have been known about before 2008 but was as it turned out was little understood.

What this guide and its preparation have taught me that the role has become much more professional. You can’t just be working in isolation. The input took phone calls from all around the world with teams writing sections before coming together to write the final note. However you have to make clarity and independence of thought to participate and build consensus. Very much like being a NED.

The NED’s likewise have to be much more professional in the way they carry out their duty. They can’t just be a nominee on a prospectus and must undertake their role with full independence of thought for the long term benefit of the investors within. It is recognition of what may have been regarded as the hobby end of the business has at last grown. The amount of time and effort per Fund required is rising and to reflect this the fees will have to also rise. I completed a Fund Board meeting last week which was 195 pages in text with a further 80 for the Annual Report and two full presentations from the Investment manager from funds and further corporate updates.

I gave my first speech on Corporate Governance at Hedgestock in 2006. Firstly well done Albourne for allowing me the soap box (I attracted an audience of 15). When I look at the presentation not a lot of the core principals have changed just the detail around them.

I have always thought that strong corporate governance and oversight improves the Investment Manager and may well take some of the pressures off the start-ups. A good working relationship will see an Independent Board Member reasoning when the Investment Manager is developing and can act as a confident in its decisions.

Happy to share my review from 2006 and where I see this aspect of Non Executive work going in the future. The lessons and oversight of the Financial world will spill over into first the allied industries and then in general into corporate life. It worries me that many institutional investors, such as pension funds still see this aspect of their structure as relying on goodwill. Given the low yield we now live in they may wake up too late and think they are still in early 2008.

The Alternative Investment Management Association (AIMA), the global hedge fund association, has published an updated Fund Directors’ Guide. Available through AIMA.

Albourne Partners

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