This document analyzes the operational due diligence frameworks used by over 275 global hedge fund allocators. It finds that there is substantial variety in the frameworks, with dedicated, shared, modular, and hybrid approaches all being used. Larger allocators tended to dedicate more resources specifically to operational due diligence. The study provides benchmarks for investors to evaluate the appropriateness of an allocator's operational due diligence framework.
Presentation by Kees Koedijk. Professor of Financial Management and Dean of the Tilburg School of Economics and Management, held on June 8 at an ICPM conference in Toronto. Also visit the website www.investmentbeliefs.org
Financial regulators have issued an advisory to remind institutions to remind institutions of supervisory expectations regarding sound practices for managing interest rate risk. BankRisk from TriNovus can assisit financial institutions with this requirement. www.trinovus.com
Presentation by Kees Koedijk. Professor of Financial Management and Dean of the Tilburg School of Economics and Management, held on June 8 at an ICPM conference in Toronto. Also visit the website www.investmentbeliefs.org
Financial regulators have issued an advisory to remind institutions to remind institutions of supervisory expectations regarding sound practices for managing interest rate risk. BankRisk from TriNovus can assisit financial institutions with this requirement. www.trinovus.com
DSP US Flexible Equity Fund - An Open Ended Fund Of Funds Scheme Investing in a US Equity Fund
*The term “Flexible” in the name of the Scheme signifies that the Investment Manager of the Underlying Fund can invest either in growth or value investment characteristic securities placing an emphasis as the market outlook warrants.
This Open-ended Fund of Funds Scheme is suitable for investors who are seeking*:
1. Long-term capital growth
2. Investment in units of overseas funds which invest primarily in equity and equity related securities of companies domiciled in, or exercising the predominant part of their economic activity in the USA
3. High risk (Brown)
*Investors should consult their financial advisors if in doubt about whether the Scheme is suitable for them.
Note : Risk may be represented as :
(Blue) : Investors understand that their principal will be at low risk
(Yellow) : Investors understand that their principal will be at medium risk
(Brown) : Investors understand that their principal will be at high risk
Today, alternative asset managers are facing ever-increasing scrutiny from both investors and regulatory bodies.
Investors are focused not only on returns, but also on the valuation governance practices of the funds in which
they may invest. The emphasis on transparency of the valuation process, as well as heightened interest around
internal controls, conflicts of interest, and general fund protocols, has increased the importance of funds having
written valuation policies and procedures with a structure in place to monitor and enforce them. This document outlines the best practices in this area.
DSP US Flexible Equity Fund - An Open Ended Fund Of Funds Scheme Investing in a US Equity Fund
*The term “Flexible” in the name of the Scheme signifies that the Investment Manager of the Underlying Fund can invest either in growth or value investment characteristic securities placing an emphasis as the market outlook warrants.
This Open-ended Fund of Funds Scheme is suitable for investors who are seeking*:
1. Long-term capital growth
2. Investment in units of overseas funds which invest primarily in equity and equity related securities of companies domiciled in, or exercising the predominant part of their economic activity in the USA
3. High risk (Brown)
*Investors should consult their financial advisors if in doubt about whether the Scheme is suitable for them.
Note : Risk may be represented as :
(Blue) : Investors understand that their principal will be at low risk
(Yellow) : Investors understand that their principal will be at medium risk
(Brown) : Investors understand that their principal will be at high risk
Today, alternative asset managers are facing ever-increasing scrutiny from both investors and regulatory bodies.
Investors are focused not only on returns, but also on the valuation governance practices of the funds in which
they may invest. The emphasis on transparency of the valuation process, as well as heightened interest around
internal controls, conflicts of interest, and general fund protocols, has increased the importance of funds having
written valuation policies and procedures with a structure in place to monitor and enforce them. This document outlines the best practices in this area.
A Study on Investors Perception towards Mutual Fund Investments (With Special...Dr. Amarjeet Singh
This examination on Investors acknowledgment
towards and late improvement and headway of Mutual Fund
premiums in Alwar city goes under the board an area of
organization publicizing. In the wide thought of organization
publicizing it exclusively centers around the exhibiting of cash
related organization specifically basic resources. Well ordered
Indian budgetary market is getting the chance to be engaged
and the supply of various fiscal instruments ought to be in
parity to the premium perspectives of the monetary
authorities. The prime drive of any hypothesis is to get most
extraordinary returned with a base danger and normal
resources allow to the budgetary masters. The examination
gives an information into the sorts of risks which exist in a
mutual save plan. The data was assembled from shared save
budgetary authorities similarly as non basic store examiners of
this industry. The investigation bases on the association
between theory decision and factors like liquidity, cash related
care, and demography. It was found commonly safe resources
and liquidity of store plot are having influence on the
budgetary authority's acumen for placing assets into the
mutual save. With the more broad thought of the distinctive
components of organization publicizing, thing care, mark
tendencies, and money related authority's satisfaction are the
specific regions of the examination. The other displaying limits
like thing progression publicize division, channels of
exhibiting, thing life cycle, scale headway procedures and their
impact of Marketing are completely disposed of from the audit
of this examination. So likewise the availability of substitute
aftereffect of normal hold units and their impact on this
organization thing it also rejected in the examination. In
reality, even in the normal store monetary authorities lead also
the researcher concentrate only the urban theorists and their
anxiety for this examination work. The rustic speculator's
perspectives are totally barred from the investigation.
Discussion1Explaining the results of Efficient Frontier Analysis.docxmadlynplamondon
Discussion1
Explaining the results of Efficient Frontier Analysis to non-technical decision-makers
The implementation of Efficient Frontier Analysis in an organization helps the process of strategic risk management to encompass and advanced analytical technique. The outcomes derived from it can easily be acknowledged and utilised by the non-technical decision-makers of the organisation as well. With the private utilization of Efficient Frontier Analysis, the decision-maker can easily consider identifying Complex property and developing casualty risk profiles. It has been observed in the considered case study that the most convincing organizational decision-making practices to determine efficient risk management need extensive acknowledgement of the governance structure followed by the processes and the varieties of tools used in it. In addition to it, they are also subjected to be developed on the basis of the guidance and principles of ISO 31000 followed by the guidance of implementation empowered by Australian and New Zealand handbook HB 436 (Fraser, Simkins & Narvaez, 2014). The consideration of Efficient Frontier Analysis emphasizes the hierarchical roles within an internal audit function as well as the organization and risk management function.
The results of implementing Efficient Frontier Analysis depend in-depth assessment of the risk portfolio volatility followed by the pricing structure acknowledged through decision-making. Furthermore, the considered case study also explains that the implementation of Efficient Frontier Analysis also needs to analyze the insurance layering efficiency to determine the risk portfolio application in order to ensure the catastrophic loss potential within the decision-making practices of strategic risk management (Rezaeiani & Foroughi, 2018). Additionally, a business organization implementing it can also become capable of analyzing and resolving the control break down easily with the identification of risk origins, actors, causes and consequences precisely. With the help of proper strategic management, the non-technical decision-making practices can be functional through a risk appetite framework that influences risk control framework. both these further impact on the emergence of the dynamic risks followed by integrated enterprise risk profile and scenario and stress testing by enabling untapped opportunities.
Recommendations assuming the risk appetite
The notion of risk appetite is strongly aligned with risk tolerance to influence the scenario and stress testing abilities to develop an analytical framework. The fundamental purpose of this Framework is to drive multiple sets of discussions based on analytical information to help the decision-makers in determining the risk profile and lead the organization to constitute competitive opportunities. It has been observed that the risk appetite in association with the risk tolerance helps them in categorizing the risks and further reframe them as opportuniti ...
EVALUATING PERCEPTION OF INVESTORS TOWARDS MUTUAL FUNDS & PERFORMANCE OF THE ...Nishant Kumar
This study has investigated into the perception of the investors in Indian markets towards Mutual Funds and has evaluated the returns of the top Mutual Fund performers in India over period of last 3 years – January 1, 2016 to December 31, 2018. It has helped us to conclude on how different schemes attract investors of different age groups and how the impact of different characteristics are known by investors.
This study looks specifically into open-ended equity schemes. Returns have been calculated using daily closing values of NAV of the selected schemes. BSE-Sensex has been chosen as the market portfolio as a comparison basis here. Based on Sharpe, Treynor, and Jensen’s measure the historical performance of the selected schemes are evaluated, whose results will be useful for investors for taking better investment decisions.
A Study on Performance Evaluation of Equity Shares and Mutual FundsProjects Kart
In the current economic scenario interest rates are falling and fluctuation in the share market has put investors in confusion. One finds it difficult to take decision on investment. This is primarily, because of investments are risky in nature and investors have to consider various factors before investing in investment avenues.
These factors include risk, return, volatility of shares and liquidity. The main objective of comparing investment in equity shares with mutual fund schemes is to analyze the performance of mutual funds with their benchmark and comparing them with equities by using risk, return, beta and alpha as a parameter.
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Strategies with high active share have garnered much attention from institutional investors following the release of Martijn Cremers and Antti Petajisto’s research paper that introduced the concept.
In this paper we isolate the impact of active share on performance by focusing on “product pairs,” which are two portfolios that share many characteristics (same management team, basic philosophy, research platform, etc.) but have different degrees of concentration (concentrated vs. diversified), which translates fairly directly to a difference in active share.
We ran several analyses using product pairs identified in Callan’s database in order to better understand— and quantify—the performance differences between concentrated and diversified products managed by the same team. Our analysis reveals the inherent difficulty of identifying reliable predictors of excess return across strategies and over time. High active share may be worthy of consideration as a screening variable, but it is clearly only one of potentially dozens of factors that might influence the magnitude and direction of the excess return for any given strategy over time.
Author Gregory C. Allen is Callan’s President and Director of Research. He oversees Callan’s Fund Sponsor Consulting, Trust Advisory, and multiple other firm-wide research groups.
Greg is a member of Callan’s Management, Alternatives Review, and Client Policy Review Committees. He is also a member of the Investment Committee, which has oversight responsibility for all of Callan’s discretionary multi-manager solutions.
Similar to Analyzing operational-due-diligence-frameworks-in-fund-of-hedge-funds-corgentum (20)
Corgentum, twitter, hedge fund operational due diligence, hedge fund, operational due diligence, operational risk, fund of hedge funds, family office, fraud, ponzi, pension, endowment, foundation, risk, operational risk
Originally posted at the hedge fund operational due diligence blog www.Corgentum.com/blog an overview of FAS 157 reclassification and negotiation between hedge funds and auditors
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Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
how to sell pi coins in South Korea profitably.DOT TECH
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Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
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how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
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The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
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Abhay Bhutada Leads Poonawalla Fincorp To Record Low NPA And Unprecedented Gr...Vighnesh Shashtri
Under the leadership of Abhay Bhutada, Poonawalla Fincorp has achieved record-low Non-Performing Assets (NPA) and witnessed unprecedented growth. Bhutada's strategic vision and effective management have significantly enhanced the company's financial health, showcasing a robust performance in the financial sector. This achievement underscores the company's resilience and ability to thrive in a competitive market, setting a new benchmark for operational excellence in the industry.
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
BONKMILLON Unleashes Its Bonkers Potential on Solana.pdfcoingabbar
Introducing BONKMILLON - The Most Bonkers Meme Coin Yet
Let's be real for a second – the world of meme coins can feel like a bit of a circus at times. Every other day, there's a new token promising to take you "to the moon" or offering some groundbreaking utility that'll change the game forever. But how many of them actually deliver on that hype?
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1. Analyzing Operational Due Diligence Frameworks
In Fund of Hedge Funds
Jason Scharfman1, Managing Partner, Corgentum Consulting LLC
Abstract
An analysis was conducted using a sample of over 275 global hedge fund allocators of the
operational due diligence frameworks in place at these organizations. By developing an
understanding of the operational due diligence structures in place, this paper establishes a
transparent benchmark against which operational due diligence frameworks may be compared.
The findings indicate there is a substantial variety present in the operational due diligence
frameworks utilized by hedge fund allocators, such as fund of hedge funds. On a global basis, a
myriad of hybrid approaches are in place at smaller allocators. Regionally, while a dedicated
approach to operational due diligence is generally favored, no one framework emerged as a clear
global leader. As compared to smaller allocators, larger organizations seemed to have more
resources dedicated specifically to operational due diligence. These findings are consistent with
predictions that hedge fund allocators such as fund of hedge funds, in part driven by investor
demand, will continue to allocate more resources to underlying hedge fund manager operational
due diligence.
May, 2009
_________________________________
1
Jason Scharfman (scharfman@corgentum.com) is the author of Hedge Fund Operational Due Diligence:
Understanding the Risks (John Wiley & Sons 2008) and a Managing Partner at Corgentum Consulting LLC
(www.corgentum.com).
2. Due diligence is a critical component in the hedge fund selection and allocation process.
In light of a series of recent losses due to fraudulent activities and Ponzi schemes by individuals
such as Bernard Madoff, both hedge fund allocation organizations such as fund of hedge funds as
well as investment consultants who recommend hedge funds to investors will likely need to re-
think their approaches towards due diligence. In its current state, the modern hedge fund due
diligence paradigm can be broadly bifurcated into two main sub-sections of due diligence:
investment and operational. For the purposes of this study, the term operational due diligence is
utilized to refer to the process of gathering data regarding a hedge fund’s operational risks (i.e.
non-investment related risks). Examples of the operational risk factors on which data is typically
gathered during an operational due diligence review include compliance processes, valuation
techniques, information technology infrastructure, business continuity and disaster recovery
planning, cash management controls and quality of third-party service providers such as
administrators and auditors.
Throughout the fund of hedge funds universe, the operational due diligence process
suffers from a global lack of uniformity in establishing a minimum floor for the amount of
operational data which should be collected. Furthermore, there is no consensus on which
operational risk factors should be analyzed at a minimum, as part of the operational due diligence
process. As such, there is a wide variety in both the robustness of operational due diligence
processes and frameworks in place across the fund of hedge funds universe. To date, fund of
hedge funds have taken a myriad of approaches towards:
• Determining the amount of resources to dedicate to operational due diligence
• Designing the structure of their operational due diligence functions
1
3. • Determining when operational due diligence becomes involved in the entire due
diligence process
This paper examines the second element cited above, namely the current structure of operational
due diligence frameworks currently employed by fund of hedge funds, with a goal towards
establishing a transparent benchmark of global and regional trends in operational due diligence
framework utilization.
Organizations Which Were Included in This Study
For the purposes of this study, the term fund of hedge funds was defined as an investment
organization whose primary purpose is to allocate capital to a portfolio of underlying hedge fund
managers. The types of institutions from which data was obtained included those organizations
which market themselves as fund of hedge funds as well as multi-family offices, large
independent financial advisory practices and private banking organizations that manage
portfolios of hedge funds on behalf of their clients.
Certain fund of hedge funds organizations included in this study were part of larger
organizational entities which managed several products in addition to fund of hedge funds. In
these specific cases, only the fund of hedge funds units that were separately managed entities
with distinct management, despite any affiliations (legal or otherwise) with related parties, were
included in this study. The hedge fund managers allocated to by the fund of hedge funds could be
of any investment strategy. Additionally, while some of the managers included in this study
maintained separately managed accounts with underlying hedge fund managers, the vast majority
did not, and their investments were in pooled vehicles managed by the hedge fund manager.
Fund of hedge funds that primarily allocated to funds that were not hedge funds (i.e. -
private equity funds, venture capital funds, real estate funds etc.) were not included in this study.
2
4. Organizations which solely manage their own proprietary capital, such as certain pensions,
endowments, charitable philanthropies and single family offices were excluded from this study.
No restrictions were placed on the length of time on which the organization had been in business
to be included in this study. That being said, the shortest life span of the organizational age of a
fund of hedge funds included in this study was approximately nine months.
A globally diverse cross-section of fund of hedge funds were included in this study as
there were no geographic restrictions. All fund of hedge funds organizations were broadly
classified into one of three geographic regions: Asia, Europe and North America. It should be
noted that the regional classification were utilized to reference the location of fund of hedge
funds organizational headquarters and not any directional geographic biases which may have
been present in the portfolios of underlying hedge funds to which they may allocate.
Number of fund of hedge funds included in this study
In order to respect the confidentiality of both those organizations that directly participated
in this study or upon which research had been performed, the names of specific organizations
have intentionally not been disclosed. Furthermore, the exact number of fund of hedge funds
managers utilized in this survey is not specifically disclosed. This is to prevent reverse
engineering of the specific identity of any one fund of hedge funds organization included in this
survey. A range of the number of fund of hedge funds reviewed has been provided. In this study
between 275 and 350 fund of hedge funds were utilized.
Data
Sources:
Data from this study was culled from a variety of different sources. The primary sources
utilized included interviews and surveys with employees working at funds of hedge funds
3
5. organizations as well as other organizations, as described above, which allocate to hedge funds.
Other data was collected from publically available databases and regulatory archives including
those maintained by the United States Securities and Exchange Commission, the United
Kingdom based Financial Services Authority, the Hong Kong Securities and Futures
Commission and the Cayman Islands Monetary Authority. As a general comment, all
percentages stated in this report have been rounded to the nearest whole percent.
Geographic distribution:
Of those fund of hedge funds managers included in this study, as summarized in Table 1,
74% were from North America, 20% from Europe and 6% from Asia. For those fund of hedge
funds which maintained multiple offices in different continents, the headquarters of the fund of
hedge funds operations was generally utilized to determine geographic location.
Table 1: Percentage of Fund of Hedge Funds Included in This Study Classified by Region
Region Percentage of managers included in study
North America 74%
Europe 20%
Asia 6%
Assets Under Management
There were no minimum assets under management (“AUM”) requirements for funds of
hedge funds to be included in this study. For purposes of this study, fund of hedge funds were
classified into two distinct groups with the separation point being USD $1 billion. Of those fund
of hedge funds managers included in this study, 39% managed less than USD $1 billion and 61%
managed more than USD $1 billion. All AUM figures were current as of December 31, 2008.
The USD $1 billion cutoff represents total firm AUM and not just the amount invested in hedge
4
6. funds however, for the vast majority of organizations under consideration hedge fund
investments made up the bulk, if not all, of the firm’s assets. It should also be noted, that in most
cases AUM figures were self-reported by the respective fund of hedge funds and were not
independently verified as part of the course of this study.
Operational Due Diligence Framework Style Buckets
Fund of hedge funds operational due diligence frameworks were classified into four style
buckets: dedicated, shared, modular and hybrid. It should be noted that each of these
operational due diligence style buckets refer to the framework implemented at a fund of hedge
funds to perform operational due diligence reviews. These style buckets do not address which
individuals or groups at a fund of hedge funds holds the authority to make the ultimate
operational conclusion regarding a particular hedge fund manager. Furthermore, these style
buckets do not address which individuals or groups, such as an investment committee, has the
final authority to make the final allocation decision to a hedge fund manager. A definition of
each of the style categories follows below:
Dedicated – An operational due diligence framework where a fund of hedge funds has at
least one employee whose full time responsibility is vetting the operational risks at hedge fund
managers
Shared – An operational due diligence framework where the responsibility for reviewing
the operational risk exposures at hedge funds is shared by the same individuals who have
responsibility for investment due diligence. No full time dedicated operational due diligence staff
are employed.
Modular – An operational due diligence framework whereby the operational due
5
7. diligence process is classified into functional components and parsed out among different
specialists with relevant domain specific knowledge. It is important to note that in a modular
operational due diligence framework, these domain experts typically have other responsibilities
within the larger fund of hedge funds organization outside of their operational due diligence
responsibilities. Examples of the titles which these functional domain experts typically hold
within the fund of hedge funds organization would be General Counsel, Chief Technology
Officer, Chief Compliance Officer and Chief Financial Officer.
Under a modular approach the work of these domain experts is often pieced together by
an individual or group of individuals which we will refer to as an operational generalist. The
operational generalist can be thought of as an information aggregator who pieces together the
disparate functional reviews completed by the domain experts to facilitate the fund of hedge
funds organization progressing towards arriving at an operational risk conclusion. The
operational due diligence duties of the operational generalist can be very similar to those of
operational due diligence analysts under a dedicated framework and can include such things as
on-site manager visits and operational risk report generation.
Under a modular framework the operational generalist or group of individuals performing
the operational generalist function can either be a dedicated operational due diligence
professional (i.e. – fitting into the definition of the dedicated approach) or the operational
generalist(s) themselves can serve other functions within the organization and may even be
domain expert(s) in their own right. An example of this would be an individual whose title is
Chief Operating Officer and who has other responsibilities within the fund of hedge funds
organization, yet who also serves as the operational generalist piecing together the operational
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8. due diligence work of the functional domain experts. Exhibit 1 summarizes the role of the
operational generalist in a typical modular framework.
Exhibit 1: Example Modular Operational Due Diligence Framework
Hybrid – A hybrid operational due diligence framework refers to an approach that
encompasses some combination of the three previously described approaches (dedicated, shared,
modular). An example of a hybrid framework would be a fund of hedge funds organization that
employs a full time operational due diligence analyst (i.e. – dedicated framework) while
leveraging off in-house domain experts as needed. Continuing this example, these domain
experts would not be a part of the standard operational due diligence review process followed by
the fund of hedge funds (i.e. – such as a modular approach) but utilized on an ad-hoc basis.
Another example of an operational due diligence framework which would be fall under the
hybrid classification would be a fund of hedge funds which outsources the operational due
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9. diligence function, either in part or entirely, to a third-party operational risk consultant.
Therefore, within those managers which fell into the hybrid classification it is important to note
that a significant diversity of sub-approaches existed.
EMPIRICAL RESULTS
General Trends
The global results of this study, summarized in Table 2, indicate a relatively equal
distribution among three of the hedge fund operational due diligence frameworks (27%
dedicated, 31% shared, and 28% hybrid) with the modular approach representing only
approximately 14% of the operational due diligence frameworks of the fund of hedge funds
managers included in this study.
Table 2: Operational Due Diligence Frameworks at Fund of Hedge Funds Globally
Operational Due Diligence Framework Percent
Dedicated 27%
Shared 31%
Modular 14%
Hybrid 28%
Regional Analysis
Within each of the three regions covered by this study (Asia, Europe and North America)
slightly different trends emerge as compared to the global data set. Specifically, Asian based
fund of hedge funds were shown to slightly favor a dedicated approach (34%) over the roughly
equal distribution of between the shared framework (27%) and hybrid approach (25%). The use
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10. of the modular approach in those Asian fund of hedge funds surveyed was 14% which mirrored
the global trend.
In Europe, managers showed even a greater preference than in Asia towards a dedicated
operational due diligence framework at 45%. Also dominating the European landscape were
hybrid approaches at 32%. While 14% followed shared approaches, the modular approach was
once again the least utilized approach at just 9%.
North American fund of hedge funds closely mirrored the global trends. This is
unsurprising since North American based managers made up the vast majority of those fund of
hedge funds included in this study. The operational due diligence framework data organized by
region is presented in Table 3.
Table 3: Operational Due Diligence Frameworks Utilized by Region
Region Dedicated Shared Modular Hybrid
Asia 34% 27% 14% 25%
Europe 45% 14% 9% 32%
North America 22% 34% 15% 29%
Analysis by Assets Under Management
In examining the operational frameworks utilized when analyzing the fund of hedge
funds as classified by AUM, marked differences are notable when comparing managers above
and below the USD $1 billion level. Almost half of those fund of hedge funds managers under
the USD $1 billion, 46% to be exact, utilize a hybrid operational due diligence framework. The
next largest operational due diligence framework utilized at the under USD $1 billion level was
the shared approach at 29%. Dedicated frameworks only made up approximately 14% of the
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11. fund of hedge funds included in this study. Once again, the least employed approach was a
modular one at 11%.
For organizations with aggregate AUM larger than USD $1 billion the most employed
operational due diligence framework was the dedicated framework at 32%. This was closely
followed by shared operational due diligence frameworks at 30%. In fund of hedge funds
organizaitons which managed over USD $1 billion the hybrid approach represented a much
smaller 23% as compared to previous 46% in managers under USD $1 billion. Finally,
continuing the trend, the modular approach was the least employed at 15%. Table 4 summarizes
the results of analysis by AUM.
Table 4: Operational Due Diligence Frameworks Classified by AUM
Operational Due Diligence Framework AUM Under USD $1BN AUM Over USD $1BN
Dedicated 14% 32%
Shared 29% 30%
Modular 11% 15%
Hybrid 46% 23%
Conclusion
A considerable variety exists in the distribution of operational due diligence frameworks
among fund of hedge fund organizations. While slightly more uniformity seems to be present on
a regional basis and among managers with AUM under USD $1 billion, a diversity of approaches
is still persistent in both large and small organizations. Explanations for these differences are
attributable to a wide variety factors including the organic growth of the operational due
diligence functions across divergent paths in different organizations over time, a previous lack of
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