CAYMAN FUNDS | 2017
Jennissen: Yes, we are also seeing more interest from PE. It’s a lot
easier to implement the advisory board role and they’re actually quite
happy to have someone else take control of those functions.
Collins: Governance in the alternative asset space has been an
evolution, Europe was first in terms of having robust independent
governance at the fund level, next to follow was the US for their
funds structured as Cayman companies.
The next phase which we are in now is the appointment of advisory
boards on limited partnerships acting as master funds and even
some domestic funds. This is a first sign that the North American
market is really embracing the value of independent oversight. The
next logical step will be independent oversight in the PE space.
MacKay: It’s important to recognise that the oversight in PE is
different from the oversight in hedge. The oversight in hedge is all
encompassing; it’s performance as well as structure and contractual
consistency. In the PE space, the partnership structure likely
includes an investment committee and a limited partner advisory
committee (LPAC) which combine to focus on investment decisions
and investment performance.
The independent governance intrusion into the PE space is because
the members of the LPAC want to avoid assumed fiduciary
responsibilities to their co-partners, so the independent piece is
relatively limited in scope. There’s growing interest in PE but I don’t
think it’s a dam that’s about to break. There is an opportunity to be
involved but we’ll see over time, it’s already been a slow burner.
Smith: With the enhanced focus on corporate governance being investordriven,
it’ll take some key investors on the PE side to push it along.
MacKay: You can actually see the evolution in this room—10 years
ago Richard wouldn’t be the only lawyer in the room. That itself
demonstrates the way the industry locally has shifted in terms of the
inputs into discussions with government, CIMA, etc.
Jennissen: With the introduction of the new limited liability company
(LLC), you’ll again see a broader scope of the people being brought
on to boards because it now offers the managing member a system
more aligned with the US model. People like the model in the US and
they’re very comfortable with it.
Cook: For the benefits that independence brings—whether it’s
overcoming conflicts or just providing oversight that investors can’t do
themselves—the relative cost is minimal compared with the dollars
involved for the funds. It’s one extra cost certainly that needs to be
borne and overcome but relatively speaking it’s not that great a cost
either way and the fact that we’re able to speak with one another and
interact with the regulator regularly means that corporate governance
isn’t just about the directors on the board. It’s about the directors
interacting with the auditors and the administrators and the lawyers
and making sure that everyone collectively is aware of what they need
to be aware of so that the investors’ interests are protected.
Whenever I’m pitching for new business and people say, ‘we’re
speaking to others as well’ I always say, ‘that’s great, we all have
different backgrounds and perspectives but essentially whatever you
do, someone here is going to be better than someone from overseas
or someone who’s not in this space generally’.
Scott: There’s a lot of opportunity for Cayman to help move the
needle. It’s taken maybe six years of slow crawl to get more concise,