Hedge Fund Investors Continue To Question Offshore Director Independence And Credibility, According To Corgentum Consulting's Survey

NEW YORK, March 6, 2014 /PRNewswire/ -- Corgentum Consulting, the leading provider of the industry's most comprehensive hedge fund operational due diligence reviews and background investigations, today announced the results of a survey that shows the majority of investors and operational due diligence analysts (73%) feel directors do not serve a useful function. Even a larger percentage (76%) stated that the feel directors do not provide true independent oversight of funds.

"Offshore jurisdictions and fund directors have an ongoing public relations problem when it comes to investors. Competent fund directors can actually add value to the overall governance of a hedge fund. Many investors simply view these directors as an extension of the fund itself. Compounding the problems 62% of the group surveyed felt directors didn't have much credibility with fund managers," said Jason Scharfman, Managing Partner of Corgentum Consulting.

Only 39% of respondents indicated that they conduct interviews with fund directors as part of their due diligence process. Furthermore, a much smaller segment (18%) performs background investigation on these directors.

"Many investors are either not researching or under researching hedge fund directors during the due diligence process. This represents a significant missed opportunity to increase their understanding of the governance mechanisms in place at funds. Through operational due diligence, investors and ODD analysts can separate the better directors from the pack," Scharfman added.

Additional survey findings include:

• Investors and ODD professionals continue to disagree over how many directorships are appropriate. Approximately 31% thought that the number of fund directorship positions should ideally be capped at 15 directorships, while a smaller percentage (24%) thought the number of directorships should be capped at nine. This challenges previous industry survey data that had shown a higher investor tolerance for more board positions. It also contradicts the reality that many investors accept, where many directors sit on different boards well in excess of these caps.
• 63% of respondents stated that the most important function of a director was to serve as an investor watchdog. This is at odds with the realities of hedge fund investing where directors have virtually no ongoing interaction directly with fund investors.
• 71% of investors and ODD analysts felt that directors should be held personally liable if a fund fails for operational reasons. These findings build upon court decisions such as the Weavering case.

The survey was conducted as part of the Corgentum's 2014 webinar series. Respondents represent a wide variety of operational due diligence analysts and hedge fund investors ranging from ultra-high net worth individuals and family offices to institutional hedge fund investors including pensions, endowments, banks and insurance companies.

Signup to learn more about the survey and get notifications about upcoming webinars at http://corgentum.com/contact

Notes to Editors

About Corgentum Consulting

Corgentum Consulting is a specialist consulting firm which performs operational due diligence reviews and background investigations of fund managers and directors. The firm works with investors including fund of funds, pensions, endowments, banks and family offices to conduct the industry's most comprehensive operational due diligence reviews. Corgentum's work covers all fund strategies globally including hedge funds, private equity, real estate funds, and traditional funds. The firm's sole focus on operational due diligence, veteran experience, innovative original research and fundamental bottom up approach to due diligence allows Corgentum to ensure that the firm's clients avoid unnecessary operational risks. Corgentum is headquartered at 1180 Avenue of the Americas, 8th Floor, New York, NY 10036. For more information visit www.Corgentum.com

SOURCE Corgentum Consulting