- Investors are placing greater emphasis on the depth and breadth of their ODD team – 80% of respondents have a dedicated ODD team and investors conduct an average of 50 manager reviews a year.
- Investors are increasingly focused on fund expenses – The majority of respondents have little or no tolerance for expenses such as non research related travel or employee compensation being charged to the fund. 40% accept charges such as regulatory reporting.
- Independent governance is expected – The majority of respondents prefer at least three directors on the board including two independent directors. Nearly a quarter vetoed an investment due to lack of independent governance.
- Start-up managers need to invest in people and process – Investment in human capital and proper segregation of duties were ranked as the top two operational recommendations for start-up and emerging managers.
- Managers should expect a thorough review of operations during the site visit – Almost 60% of investors observe daily operations during a typical ODD review, using a ‘trust but verify’ approach to validate what managers represent in their documentation.
Deutsche Bank Survey Highlights Greater Investor Emphasis On Hedge Fund Operational Due Diligence
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