Qualitative analysis / due diligence

In the hedge funds asset class, a quantitative-only risk assessment is insufficient. We perform a thorough, qualitative assessment and due diligence of the risks and potential rewards of an investment strategy.

Two integrated frameworks

• The profiling framework is the foundation of our qualitative analysis. Its structure is comparable to a mind-map, which takes account of over 200 unique risk factors. The aim is to obtain a broad overview of the diverse risk aspects adherent to hedge funds. Every factor is ranked on a scale from 1 to 5, and every ranking features a confidence level, providing transparency on the accuracy of the ranking.
  
  
• The loss framework focuses on those factors which have been determined to be the main reasons responsible for losses. These factors are assessed both independently and in relation to one another.

Our approach is very transparent, strengths and weaknesses are displayed at every level and extreme values, yellow and red flags, are pointed out. While the factors under scrutiny are soft-factors and, therefore, qualitative and judgmental in nature, our qualitative analysis results in a quantified, qualitative risk score and confidence level, allowing for comparison with our quantitative risk analysis and between funds.

Besides applying our qualitative risk frameworks and highlighting and commenting on yellow and red flags we write a comprehensive commentary of 20-30 pages, split into sections covering legal, organizational, operational and strategy related risk factors.