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2011 global hedge fund survey - Hedge fund governance - EY - United States

2011 global hedge fund survey: coming of age

Hedge fund governance

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“On average, the boards of directors are weak.” Survey respondent
(North American investor)

Managers and investors agree that independence is important for good governance, but investors are less confident in the effectiveness of boards.

Boards dominate the hedge fund landscape, except for North America, where less than 15% of domestic funds have boards.

There is a perception gap between managers and investors regarding the effectiveness of boards — almost 70% of managers say boards are very effective while only 45% of investors feel that way. Interestingly, this perception gap is greatest in Europe, where 90% of managers say boards are effective while only about 30% of investors agree.

This may partially reflect the heightened attention to governance in Europe as well as investors’ view of the board’s level of empowerment and its sophistication in monitoring the activity of a hedge fund.

In a global business world where independent, effective boards are a prevalent best practice, hedge funds cannot be immune. The trick is to make boards effective while working in harmony with the managers.

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