The governance around hedge funds has changed dramatically since the introduction of the mutual funds law in Cayman 25 years ago. Even eight years ago, fund directors were either conflicted because they came from the administrator of a fund or they had only limited investments and securities experience. Today, the demand for independent oversight is growing, not least in response to investor and regulatory pressure.
The same demand also exists for funds dealing with crypto assets but regulatory uncertainty and lack of knowledge about the nascent industry means that most requests for independent directors to serve on the boards of crypto funds are being denied, panelists at the Campbells Fund Focus conference in November said.
“When we look at crypto funds, we are seeing demand for independence,” said Yolanda Banks McCoy, director at fund governance firm HighWater. But there are only a limited number of service providers in the space and it is still a learning environment for many of them.
As a result, she said, independent directors, who must assess their own personal risk, are very selective in terms of the types of funds they can work with.