Segantii Capital Management had everything on paper: compliance committees, risk oversight, external consultants, and responsible officers.

Yet in May 2024, this 16-year-old Asian hedge fund collapsed after insider trading charges.

The real story? Having governance structures and having effective governance are completely different things.

The red flags that were ignored: As early as 2021, major banks—including Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley—began distancing themselves from Segantii, citing concerns over its trading practices. Yet, these early warning signs were seemingly disregarded internally. Concentrated decision-making and a culture that discouraged dissent meant critical risk signals from financial institutions were systematically ignored.

The broader problem: As this new Advisory Board Centre analysis reveals: "Billions have been lost—not from bad investments but governance failures. As capital allocators demand greater accountability, the hedge fund industry faces a reckoning: reform or risk losing access to institutional capital."

For institutional investors: Operational due diligence isn't just about checking compliance boxes—it's about evaluating whether governance actually works under pressure.

The funds that thrive going forward won't just have the best returns. They will have governance systems robust enough to earn and keep institutional trust.

Read the full analysis published in March 2025: https://www.advisoryboardcentre.com/insight/chrischanarticle/

Every headline about fraudulent fund managers doesn't just damage one firm—it erodes investor confidence across our entire industry. While you're focused on generating alpha, your potential investors are increasingly asking harder questions about operational risk.

The funds thriving in today's environment aren't just the ones with the best returns—they're the ones that can demonstrate bulletproof operational integrity from day one.

Smart hedge fund leaders are getting ahead of this by:

• Establishing robust operational infrastructure that scales with growth and meets institutional standards
• Building an institutional-grade governance framework before you need it
• Implementing robust compliance systems that investors recognize and trust
• Creating transparency protocols that differentiate them from competitors cutting corners

The cost of reactive compliance far exceeds the investment in getting it right upfront. More importantly, operational excellence has become a competitive advantage in investor selection.

Your investment strategy gets you to the table. Your operational infrastructure determines whether you get the allocation.

At Thalia Advisory, we partner with hedge fund leaders to transform governance from cost center to competitive advantage—because what protects you powers you.