Almost two-thirds (65 per cent) of alternative fund managers have been subject to governance-related fines or sanctions over the past two years, research by Bovill Newgate has found.

The survey, conducted in partnership with parent company Ocorian, found that while alternative fund managers said they took governance seriously and had the right skills at the most senior level, the majority had been subject to fines or sanctions.

These fines and sanctions, alongside other contributing factors, were driving alternative fund managers to “significantly” step up their focus on governance over the next two years.

The study found that 90 per cent of alternative fund managers expected their organisation’s focus on governance to increase over the next 24 months.

Almost all (99 per cent) senior leaders and senior compliance and risk executives surveyed at alternative fund manager firms said the board and senior management at their company already take governance seriously, while 54 per cent stated they take it very seriously.

Furthermore, 93 per cent believed their board and senior management already have the required blend of skills to conduct their duties correctly, and have effective roles in place to manage and mitigate governance risks.

However, the study found that 65 per cent were subject to governance-related fines or sanctions over the past two years and a further 12 per cent had received an information request or visit from the regulator during that period.

Seven in 10 (70 per cent) revealed that their organisation had already increased its focus on governance over the past two years, with 90 per cent to increase focus on governance over the next two years and 30 per cent to increase focus ‘dramatically’.

Ocorian and Bovill Newgate noted there were several ways to do with, with 96 per cent of alternative fund managers saying it was important for their organisation to use an independent specialist risk and compliance company.

More than half (55 per cent) said it was very important, while 4 per cent felt it was not important.

“The alternative fund managers we surveyed have always taken governance extremely seriously, but the regulatory landscape is constantly changing and becoming even more complex, particularly for the global firms,” commented Bovill Newgate head of regulatory and governance, Paul Ford, commented.

“For almost all firms, the survey demonstrated the importance to use an independent specialist risk and compliance company. An independent company not only brings specialist skills and experience that is very difficult and time consuming to recruit to in-house, but also technology, software and processes to manage complex frameworks and structures.

“As alternative fund managers and other clients look to increase their focus on governance, we recommend following a three lines of defence approach to protect their businesses – firstly, implement robust procedures, policies and training; secondly, comprehensively monitor these; and finally, review and challenge through independent audit.”

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