Our approach to due diligence focuses on the business risks of the manager, the legal risks of the investment vehicle, the operational risks of the control environment, and the risk exposures of the investment approach. We interpret due diligence as doing diligence, not cutting any corners and avoid relying upon assumptions or the manager’s own selling points at all costs. We achieve that by adhering to a thorough and methodical process which has our analysts assess a detailed set of risk factors. For each factor the fund and investment manager is compared to best practice and judged based on a universal set of rules.


We excel at collecting, analyzing and condensing diverse and complex sources of information in concise, usable and easily understandable reports which flag and visualize the key risks of the investment while putting our findings into context regarding the manager’s organization and the investment approach while suggesting means to address or mitigate those findings.


Based on a proprietary platform, we have disintegrated due diligence into separate modules allowing our clients to customize depth and scope of coverage to optimally serve their needs and complement their own processes:

  • Data: Standard reference manual and data platform
  • Verification: “Trust but Verify” – validate key information
  • Review: Due diligence review identifying strengths and weaknesses
  • Monitor: Monitor each investment after allocation


Data: 

The foundation of diligence is data
As the first step in every diligence review, we populate our online diligence platform based on information gathered from proprietary questionnaires and key manager and fund documents. For investors, our diligence platform replaces inconsistent, manager DDQ formats with a standardized and detailed reference manual for every fund in a portfolio. Importantly, we control data entry, ensuring consistency and completeness: we do not rely on managers to submit responses.

Verification:

“Trust but Verify” is a central element of any due diligence review
We perform a series of key “trust but verify” procedures, including independent administrator / PB confirmation of fund AUM, verification of service provider relationships, and verification of reported performance to fund financial statements. Our work can also be supported by a background check to create a comprehensive “fraud check”. Clearly, additional investment research is of little value if the manager is found to have material regulatory or civil lawsuits, or if the stated track record cannot be verified.

Review:

Our assessment of the strengths and weaknesses of each manager and fund

Level 1 Red Flag offers a desk review of key fund documents, including the manager’s marketing materials and recent performance commentary. The Red Flag review also includes our quantitative analysis of the fund’s returns.

Each “red flag” report highlights material issues in a quick turnaround package, ideal for fund screening.

Level 2 Conference Call leverages a detailed interview with each fund manager and administrator to identify key operational strengths and risks as well as the strategy’s return and risk drivers.

Enables flexible, risk based due diligence across asset classes, supporting both initial allocations and ongoing updates.

Level 3 Onsite is our flagship onsite diligence program.

Evaluates the manager’s control environment, systems, investment team, process and culture face-to-face in a comprehensive report

Monitor: 

For invested positions, we offer a range of monitoring procedures

 

In the News

December 17, 2014
New White Paper: Never Underestimate Business Risks

Our latest white paper reflects on some recent news about an embezzlement case and other examples reviewed by SwissAnalytics historically which suggest to give business risks appropriate consideration.

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