A Level 2 Review covers 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 10 different types of documents). These documents are complemented by dedicated proprietary questionnaires sent to the investment manager, the administrator and the custodian(s). The information is reviewed and followed up on with the investment manager and any of the other stakeholders. We always seek to verify information regarding service agreements, such as wire controls, calculation of NAV, assets held on custody, etc. with the providers directly rather than the investment manager.
For our desk-research assessment, our analysts follow a proprietary framework comprising 120+ qualitative risk factors spanning across organizational, risk management, 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 an 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. Each flag is commented on and our overall judgment as well as the judgment regarding specific topics are compared to the fund’s peer group and the entire library of Silver Funds. The report also specifically states all risk factors where no flags were triggered.
The following topics are covered:
- Manager History
- Business Stability
- Reliability of Track Record
- Human Resources
- Operational Partners (including Wire Controls)
- Portfolio Valuation & NAV Calculation (including Asset Verification)
- Liquidity of Instruments & Liquidity Match
- Risk Management
- Conflicts of Interest
- Redemption Risk Assessment
- Fees, Hidden Fees and Costs
- Reporting and Transparency
- Financial Statements and Audits
- Leverage and Degree of Freedom