Bureau Recommends: Cayman Islands’ ‘jumbo-directors’
A small group of ‘jumbo-directors’ registered in the Cayman Islands are sitting on the boards of hundreds of hedge funds, a Financial Times investigation has uncovered.
More than 100 non-executive directorships are held by at least four individuals, with one independent director holding 247 positions. A further 14 individuals have more than 70.
In return for fees of between $5,000 and $30,000 a year the country’s fiduciary services industry provides a hedge fund with a professional independent director.
But while the industry staunchly defends the practice and says such appointees are professionals that can handle such a large number of appointments, there are concerns about whether such independent directors are really acting in investors’ interests.
The revelations come as demand for independent directors grows following the swell in capital available to hedge funds after the financial crisis’ negative impact on investment banks’ proprietary trading activities.
The Cayman Islands Monetary Authority does not disclose information about the independent director’s appointments – even though the tiny islands are home to two-thirds of the world’s $2 trillion hedge fund industry.
Some of the world’s leading hedge fund investors are calling for greater transparency to establish exactly how many directorships are held by the tax haven’s ‘jumbo directors’, and whether they are genuinely acting in investors’ interests.
The scale of directorships, the FT suggests, invites comparisons to the US mutual fund scandal last decade and the UK’s ‘Sark Lark’ in the late 1990s where individuals faced criticism for taking on dozens of appointments meaning they were allegedly unable to properly fulfil their duties to effectively challenge company executives.
Read the full investigation here
