Institutional Investor's Alpha Magazine - June 2008 - (Page 8)

Don Seymour runs a Cayman Islands–based company that provides directors for hire. Now some command up to $25,000. “You can’t do the job for $5,000,” says Paul Roth of New York law firm Schulte Roth & Zabel, explaining that a board position can be very demanding. The role is tougher than it used to be, given that the industry is under more scrutiny, especially from institutional investors. “Clients are demanding a high caliber of director,” says Mark Lewis, an attorney at law ﬁrm Walk- ers Group in the Cayman Islands and deputy chairman of the AIMA. Duties include attending three or four meetings a year and deciding when to put up withdrawal gates or close a fund. “Historically, they’ve been directors for hire,” says Matt Auriemma, head of operational due diligence for Barclays Global Investors’ fund of hedge funds in New York. Auriemma says only 20 percent of hedge fund ﬁrms meet Barclays’s standards for a well-structured board. He recommends that investors include in their due diligence ﬁnding out whether directors are any good. In the meantime, in at least two offshore locales — the Cayman Islands and Dublin — hedge fund directorships have become a cottage industry. In the Caymans, Don Seymour — who runs a firm called dms Management that has more than 30 staff members who review fund documents — says there can be unexpected duties. “I’ve actually been in situations as an independent director where I had to sit for several days on the trading ﬂoor making trading decisions because of the catastrophic failure of an investment manager,” says Seymour, who has a bachelor’s degree in accounting from the University of Texas, Austin, and is a certiﬁed public accountant in Illinois. Neither dms nor Dublin-based Carne Global Financial Services, two of the biggest contract providers of directors, would divulge how many hedge funds a typical director is assigned. But Lewis says he knows of 26 directors who sit on more than 100 Cayman-registered hedge funds each. — Frances Denmark InvestorForum Ask institutional investors how they feel about hedge funds’ barring withdrawals during certain lockup periods and you get answers all over the map. The most common response — “it depends” — suggests a certain empathy for hedge fund managers. A plurality of institutional investors in this month’s InvestorForum survey say hedge fund managers should be able to penalize investors for early withdrawals. Type of institution you represent? Corporate pension fund 25.8% Public pension fund 15.0 Taft-Hartley pension fund 2.5 Endowment 40.0 Foundation 5.8 Other 10.8 What is the size of your fund? More than $5 billion $2.5 billion to $5 billion $1 billion to $2.49 billion $500 million to $999 million $100 million to $499 million Less than $100 million 13.6% 11.0 23.7 11.0 24.6 16.1 If you do invest in hedge funds, how big is your hedge fund allocation? More than 50 percent 1.4% 26 to 50 percent 8.1 16 to 25 percent 23.0 11 to 15 percent 20.3 6 to 10 percent 23.0 Less than 6 percent 24.3 Do you think the long lockups that some hedge funds require are justiﬁed? Yes No Depends on the strategy Don’t know If a hedge fund suffers signiﬁcant losses, should it be allowed to put up a gate to halt redemptions? Yes 38.8% No 34.5 Don’t know 26.7 Who do gates, or redeemer penalties, beneﬁt the most? Other investors 28.6% The hedge fund manager 38.4 Other market participants 2.7 30.4 Don’t know In contract negotiations with hedge fund or fund-of-funds managers, do you, or would you, insist on a key-man provision (allowing investors to withdraw their money if an important person on the investment management team leaves)? Yes 51.7% No 17.2 Don’t know 31.0 In contract negotiations with hedge fund or fund-of-funds managers, do you, or would you, insist on mostfavored-nation status? Yes 53.5% No 15.8 Don’t know 30.7 In negotiations with hedge fund or fund-of-funds managers, is legal jurisdiction (meaning, the jurisdiction in which any potential lawsuit would be brought) important to you? Yes 60.9% No 20.0 Don’t know 19.1 How do you prefer to invest in a hedge fund or fund of funds? Separately managed account 27.2% Commingled fund 47.4 Don’t know 25.4 * Responses may not total 100 percent because of rounding. Do you currently invest in hedge funds or funds of hedge funds? If a hedge fund’s returns decline Yes 60.7% signiﬁcantly, should investors that No 39.3 want to immediately redeem their money be penalized? If you answered “no,” are you Yes 40.9% considering investing in hedge funds No 30.4 or funds of hedge funds in the future? Don’t know 28.7 Yes 27.7% No 72.3 12.8% 20.5 50.4 16.2 8 • INSTITUTIONAL INVESTOR’S ALPHA • JUNE 2008

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - June 2008

Investor's Alpha Magazine - June 2008 Contents Letter From the Editor Longs & Shorts Cover Story: Alpha Hall of Fame Bruce Kovner Michael Steinhardt Kenneth Griffin Louis Bacon Steven Cohen George Soros James Simons Seth Klarman Julian Robertson Jr. Jack Nash Leon Levy Paul Tudor Jones II Alfred Winslow Jones David Swensen Looking Ahead: Back to the Future Research Center: Europe Hedge Fund 50 Unhedged: Let the Sunshine In

Institutional Investor's Alpha Magazine - June 2008

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