“Gold” Due Diligence by SwissAnalytics covers Onsite Evaluation of Operations, Investment Strategy Review, Background Checks, Legal Documents Review, Independent Verifications and Quantitative Analysis.
Our analysis begins with an extensive request for information requesting a broad set of documents such as statutory documents, filings, manuals, and service provider agreements (usually more than 20 different types of documents). These documents are complemented by dedicated proprietary questionnaires sent to the investment manager, the administrator and the custodian(s). Simultaneously, background checks are initiated complemented by references from official and unofficial sources. The information is reviewed and a detailed list of questions is drafted to be addressed during an onsite visit at the manager’s premises or followed up on with any of the other stakeholders. We typically spend at least a full day onsite interrogating individual members of the organization in one-on-one interviews following our dedicated list of questions for each individual.
An integral part of our assessment onsite involves cross-referencing information between different individuals but also between the manuals and the actual execution of processes onsite. The findings of the onsite visit are reviewed once back home and followed up on with additional questions by email, conference calls with the investment manager but also the various service providers. We always seek to verify information regarding service agreements with the providers directly rather than the investment manager.
For our assessment, our analysts follow a proprietary framework comprising 220+ qualitative risk factors spanning across organizational, strategy related, operational and legal risks. Each factor is scored according to our proprietary universal set of rules ensuring consistency among the different analysts involved. The qualitative analysis is complemented by an exhaustive quantitative analysis of historical data covering the most common risk and return measures and includes a multi-factor regression analysis and Monte-Carlo simulations.
Our findings are illustrated in comprehensive reports which concentrate on the key issues by flagging the major risks. Our overall judgment is summarized in the conclusion while putting the different findings into context regarding the organization’s size and the pursued investment strategy in our elaborate commentary (20-30 pages).
Our reports cover the following topics:
The following manager specific topics are covered:
- Organization
- Human Resources
- Business Stability
- Infrastructure
- Company History
- Legal and Compliance
- Misconduct
- Documentation of Investment Manager
The following fund specific topics are covered:
- Setup
- Track Record
- Financial Situation of Fund
- Investment Team
- Investment Process
- Portfolio Construction
- Risk Management
- Operations Team
- IT & Disaster Recovery
- Operational Partners
- Accounts & Hypothecation
- Cash Management
- Trading & Reconciliation
- Portfolio Valuation & NAV Calculation
- Reporting & Transparency
- Financial Statements and Audits
- Redemptions
- Fees, Hidden Fees & Costs
- Alignment vs. Conflicts of Interest
- Regulatory and Legal Risks
- Documentation of Fund
- Communication with SwissAnalytics
The following strategy specific topics are covered:
- Strategy Profile
- Strategy Alpha and Style Drift Risk
- Instruments Traded and Liquidity of Instruments
- Leverage & Degree of Freedom
From the above topics we are able to assess the following risks that can lead to investment losses:
- Theft
- Fraud
- Non-Compliance
- Financial Distress
- Lack of Skill
- Organizational/Operational Failure
- Below expected Performance
- High Volatility
- High Drawdowns
- Execution Failure
- Illiquidity/Lock Up
- Event Risk
