A survey of the Cayman-based hedge fund industry that showed
concerns on how well it was governed should prompt the creation of a database
to make it easier to track the sector, according to Carne Group, a firm specialising
in how the asset management industry is run.

Carne praised the Cayman Islands Monetary Authority,
however, for earlier this year releasing a survey (carried out by Greenwich
Associates) that pointed to shortcomings and concerns about the hedge fund
industry that is based in the Caribbean
jurisdiction. There are estimated to be as many as 9,500 hedge funds in the Cayman Islands.

“We feel that the results [of the survey] clearly point
towards the need for more transparency and accountability on the part of Cayman Islands fund boards. The introduction of such a
database will help to increase confidence in the Cayman
Islands’ funds sector and lay the foundations for future growth.
In the current political climate, we consider it essential that initiatives of
this kind be introduced to expand the culture of corporate governance that
investors, regulators and politicians are demanding,” Carne Group said in a
note issued yesterday.

The CIMA’s survey, completed  by 57 hedge fund managers, 28 investors, 32
fund directors and 62 service providers, found that 53 per cent of respondents
(and 63 per cent of fund directors) remain concerned that directors are not
giving themselves enough time to devote sufficient attention to each fund board
they sit on.

It also revealed that 71 per cent of investors still feel
fund governance standards need to be improved, while 86 per cent of investors
want to be provided with the total number of directorships held by each fund
director; over half of fund directors and service providers agree. Another
detail revealed that 54 per cent of hedge fund managers believe corporate
governance standards are currently “fit for purpose” versus only 11 per cent of
investors taking the same view. No investors rated hedge fund corporate
governance standards as “outstanding”.

Carne Group said the survey results echo its own research
and that of Deutsche Bank and Ernst & Young, among others.

Such findings come at a time when the hedge fund industry –
holding an estimated $2 trillion-plus of assets – faces continued regulatory
pressure. The European Union is shortly to implement sweeping regulatory
reforms - known as the Alternative Investment Fund Managers Directive – on the
EU industry.

“Once again, the emphasis in the CIMA findings is on
ensuring fund directors are sufficiently independent to represent stakeholder
interests, have enough experience to carry out their duties appropriately, and
have enough time to apply themselves to every board,” Carne said.

Carne welcomes the initiative taken by CIMA in commissioning
and publishing this survey. We feel that the results clearly point towards the
need for more transparency and accountability on the part of Cayman
Islands fund boards. The introduction of such a database will help
to increase confidence in the Cayman Islands’
funds sector and lay the foundations for future growth. In the current
political climate, we consider it essential that initiatives of this kind be
introduced to expand the culture of corporate governance that investors,
regulators and politicians are demanding,” it said.