We are experienced board members working across a variety of alternative investment strategies in onshore and multiple offshore jurisdictions.
We bring markets, risk and due diligence experience that is highly valued by fund investors and diversifying for boards.
We are committed to institutional practices, customized for our client's needs. SFA has been vetted and supported by many of the largest global allocators.
We are committed to complete transparency, integrity and independence. We are independent of service providers to avoid any conflicts of interest.
We target 15 relationships, and we limit ourselves to 18. That assures that we are always available for clients, especially during periods of market stress.
While we have strong and established relationships in each key fund jurisdiction, we are based in the New York area to be close to the networks that matter to our clients.
We are passionate about the win-win outcome when managers and investors succeed together.
We are a boutique service, wholly owned by the principals, and deeply committed to our values: experience, integrity, trust, partnership and passion.
The alternative investment funds industry has undergone a sea change since the liquidity crisis of 2008. The regulatory burden has increased enormously and fund strategies and structures have grown far more complex. Against this backdrop, the issue of effective fund governance has become the focus of attention for investors, regulators, counterparties and creditors . These parties are increasingly vocal in their demands that boards meet industry best practice standards, which requires true independence, as well as substantive and active engagement to effectively oversee fund activities and protect investor interests. Investment managers are also recognizing the benefits of a robust, diverse and experienced board that can help navigate the ever-growing regulatory demands, meet investor and allocator expectations and provide valuable insights and guidance on any matters that may arise.
SFA works with funds of various sizes. We work with start-up and emerging managers as well as some of the largest ...Read More
SFA has worked across multiple offshore and onshore jurisdictions on a wide variety of fund structures, including ...Read More
SFA has experience on onshore US and numerous offshore jurisdictions, including the Cayman Islands, Bermuda, ...Read More
SFA has experience across a wide range of alternative strategies. We have served as directors for strategies ...Read More
It is a privilege to act as stewards for a fund. We ensure our availability to our clients by capping the number of ...Read More
During the course of assignments, SFA directors not only attend regular and extraordinary board meetings, they may also authorize and review:
Independent governance can provide essential values to funds and has become a crucial element of a Board as far as investor expectations are concerned. Whilst the appointment of independent directors is not always a regulatory requirement in the jurisdictions in which funds are incorporated, independent governance is strongly encouraged. A good example of this is the release of CIMA’s Statement of Guidance-Corporate Governance of Regulated Mutual Funds in 2014. First, from a regulatory standpoint, most jurisdictions either require or strongly encourage independent governance. Second, independent directors can reduce risk for funds and their managers by providing oversight for areas that have inherent conflicts of interest (for example, the fair valuing of fund assets, non-standard transfers between funds, the allocation of trade opportunities and expenses between products.) For investors, independent directors can provide assurance that essential service providers, such as auditors and administrators, are working in the best interests of the fund. For managers, a good board can provide advice, benchmarking information and other information that add value. If a fund’s directors aren’t adding value, the fund has the wrong directors.
Independence, integrity and value-add are the most important characteristics of a good independent director. Independence means that they have no business relationship with the sponsor that might create the appearance of a conflict. Integrity means that the director has demonstrated over their career a commitment to doing the right thing in a commercially sensible and sensitive manner. In this regard, SFA is committed to a fund’s investors and managers succeeding. Finally, a fund sponsor should consider how a director will add value. Do they have a skill set which is diversifying for the board? Has the director sufficient knowledge of the strategy and financial instruments to ask the right questions. Does the director have a holistic understanding of the fund environment? Can the director become a contributor to success? Finally, we believe that face-to-face interaction is important for any relationship. While we love technology and try to leverage it in our business, there is no replacement for spending time directly with our managers.
Because our backgrounds are rooted in hedge fund research and due diligence, the SFA approach borrows the best practices in that area and brings them to fund governance. SFA works with the manager to enhance and standardize Board packages that are reviewed 3-4 times per year, preferably onsite at the investment manager’s offices. SFA is available at all times for interested investors and will attend shareholder meetings and updates.
Hedge fund governance is an area that historically has been slow to evolve. But investors and investment managers are increasingly demanding the same level of attention, energy and oversight that is more common in the field of corporate governance. This means boards with members that have a diversity of skills and experiences that conduct their business in a transparent fashion. It also means that board members need to work in a focused fashion with a reasonable number of commitments and with consistent interaction with investment managers and fund shareholders.
There is no magic to the number of 18 assignments. If one investment manager had a significant number of funds, the capacity of that director could be much lower than 18. But we wouldn't expect it to be much higher.
We think due diligence is an excellent background for fund directors. First, due diligence often trains directors to look at funds holistically. The best due diligence analysts understand how all aspects of a fund’s business fit together. They also understand that funds are only as strong as their weakest link. For example, some studies of the hedge fund industry have found that as many as 50% of funds fail for operational rather than performance reasons. Second, we think that a due diligence background necessarily sensitizes a director to the mindset of an institutional investor. Directors often represent investors in exercising their fiduciary duties to the fund. Having the mindset and the sensitivities of the investor community is essential and can provide managers with these insights in advance to address issues before they occur. Finally a director with a due diligence background is helpful in assisting the manager to effectively communicate the operational robustness of the fund to investors.
While funds should consult their Cayman counsel on their particular situation, directors of Cayman exempt funds do not need to be residents of Cayman.
SFA would view its role as completely complementary to an independent director located in the local jurisdiction. In the same way that a corporate board has directors with different backgrounds and areas of focus, SFA provides a perspective and value-add that is different but complimentary to local directors. If you currently have two local directors, the value-add of the second local director may be significantly lower than what you can achieve by having that role performed by SFA.
Most boards should meet at least three times per year and quarterly and face-to-face meetings are now considered best practice.
We strive to maximize our availability to clients by limiting the number of engagements we accept and by utilizing the latest technology to be “always on”. Since the inception of the firm more than six years ago, no SFA director has missed or been unavailable for a board meeting. However, just as institutional quality funds have business continuity plans, SFA is structured to allow either director to back-up the other as an alternate. Documents are kept securely on centralized servers that can be accessed globally on a 24/7 basis. Furthermore, the SFA directors brief each other on a regular basis on important issues in their respective client portfolios just in case such an emergency takes place. We don’t expect or accept the idea that SFA would slow decision-making for our clients.
We are big proponents of directors that are able and prepared to be investor-facing. The larger institutional investors are starting to demand this routinely. It also grounds directors by reminding them directly of the very important constituency they serve. But we also think that all investor communication must be coordinated with the manager and must be done in a manner which provides fair access and transparency and doesn’t advantage certain investors over others. Properly handled, investor interaction with directors can provide assurance to investors that the directors are knowledgeable, engaged and committed to their duties and reduce the risk of manager/shareholder conflict.
We think there are two components to an appropriate fee structure. The first is that an appropriate fee will recognize the level of involvement and engagement expected from a director. Boutique firms like SFA have a business model that allows greater levels of engagement and from which more time and commitment may be expected. Correspondingly, fees should reflect this. Second, we believe that the most appropriate fee structure is one that charges an annual flat fee. This means that funds can hold as many board meetings as are needed without fear of increasing costs – and likewise directors have no incentive to make work or create projects to add time. It also means that fees are totally transparent and known in advance. There are no surprises.
Data on more than 2100 Cayman fund boards. Special discussion on the internal directors at hedge funds.Read More