In its final study into the asset management sector last week the Financial Conduct Authority (FCA) set out a series of new governance rules requiring investment funds to appoint a minimum of two independent directors.

Industry figures told Wealth Manager they believe oversight could be useful, but warned about a potential shortage of suitable talent.

Paul Mumford (pictured), fund manager of the Cavendish Opportunities, AIM and UK Select said that the house was already halfway compliant.

We have already got one who comes from a merchant banking background, he said. When we are in board meetings he will bring us a whole number of points on things were discussing like Mifid, money laundering or whatever else.'

He said that appointing a director-for-hire could mean the initiative became an excercise in rubberstamping, however.

If you have a non-exec who is a part of the family, or a dodgy old geezer whos just a nodding donkey that is not alright, he said.

But nowadays a lot of them are quite good and take an active interest in what happens, so when something goes wrong they are also partly to blame.

Citywire AAA-rated David Stevenson, who manages the UKSmaller Companiesfund at AmatiGlobal Investors, said the real challenge is one of availability and quality.

It is a good measure but I would not be in favour of appointing people on boards just for the sake of it. They should be able to offer guidance and contribute, he explained.

Before [our recent purchase by] Mattioli Woods we had an independent director who was a retired head of a fund-managing group.

He was a voice of experience and a very useful one to have. But people like that are hard to find they are not exactly hanging from the trees.

This new measure is also bound to bring an increase in costs, but considerations on that front were not as serious.

Mumford said it would be the same as hiring an extra analyst or member of back office staff. If you get the right non-exec it is worth the cost.

Majedie chief executive Rob Harris said it could present a barrier for new, smaller players trying to enter the market, however.

The cost element is part of doing business, he said We are small so governance will not be a problem for us, he said. But the cost will make it harder for new boutiques to start, which is sad.

The FCA estimates that as a result of the new rules each authorised fund manager (AFM) will incur an average one-off cost of 9,800 and an ongoing costs of 813,000 annually across the 192 AFMs.

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Fund bosses welcome indy directors, but warn of talent shortage - Citywire.co.uk