DUE DILIGENCE
When experience counts.
Professional due diligence is one of the best forms of risk management. However, no amount of due diligence should replace the importance of experience and judgment when investing with a hedge fund manager. Greenwich Alternative Investments is a seasoned hedge fund investor and has been at the forefront of research, data collection and due diligence since 1995. We maintain information on thousands of funds and have performed hundreds of due diligence assessments for institutional investors worldwide. Our team has the experience and skill necessary to deliver meaningful due diligence upon which to base investment decisions.
No "one-shoe-fits-all"
The universe of hedge fund strategies is enormously broad and requires a thorough understanding of the dynamics across many types of capital markets. No one single line of due diligence questioning is applicable across all strategies. Instead, we view due diligence as an iterative process where the focus varies as the analyst directs within the context of the investment opportunity. Knowledge and skill are exercised every step of the way.
Balanced approach
Our due diligence approach balances quantitative with qualitative factors, viewing quantitative analysis as a valuable complement, rather than a substitute, for qualitative assessment. Greenwich AI’s due diligence goes beyond the typical review of regulatory & background checks, documents and investment performance. We translate the findings into meaningful conclusions that are essential to understanding the sources of hedge fund investment risk.
Although due diligence starts with extensive data collection and verification, we look well beyond the quantitative data to include a qualitative assessment of the manager’s strategy, management and organization, risk controls, and operations. We don’t just report the facts; we provide an interpretive discussion to help the investor identify all ‘red flag exceptions’ that could be problem areas for the future.
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Strategy - Careful assessment of the investment strategy establishes the overall context for evaluation and helps us to understand the manager’s edge. A detailed review of the investment model to ascertain the manager’s trading philosophy, effects of market conditions and future prospects is a cornerstone of Greenwich Alternative Investments’ due diligence.
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Management & Organization- The quality of the firm’s human capital provide one of the best insights into the fund’s sustainable success. We spend considerable time evaluating the personnel to ensure their skills match what we believe is required to successfully execute the investment strategy and build an ongoing business.
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Risk- Rapid change is a given in global financial markets, and, therefore, it is important to understand the manager’s commitment to investing in risk management. Does the manager demonstrate a disciplined risk management process? Are the leverage, liquidity and concentration levels acceptable for the given strategy? Careful attention is given to evaluating the manager’s tolerance for losses.
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Operations - We emphasize the importance of understanding operational sources of hedge fund risk, as improper controls can create a potentially disastrous situation. Our team is diligent in understanding the character of the fund’s back-office and operational discipline. Particular attention is given to the manager’s influence on the portfolio valuation, trading procedures as well as the quality of the fund’s service providers.
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Download:
The Art of Due Diligence |
