Hedge fund operational due diligence since 2009.

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OUTSOURCING RISK

Outsourcing is an efficient way to achieve Operational excellence for financial institutions, as well as boutique private fund  Managers. How to go about diligencing these managers:

There are three primary reasons firms outsource: variable costs, the need for specialized skills, and the desire for independence. Another reason is to offload human resources responsibilities (e.g. hiring, benefits, legal risk). Outsourcing has always been a way for financial firms to run their operations at a lower cost while being supported by people with a specific and targeted skillset. Today, large global financial institutions continue to outsource many operational areas ranging from IT to operations to accounting to legal to due diligence. If this is the case, it is very viable to invest in private fund managers, small and large, that apply the same outsourcing strategy. The way to do this safely is to ensure that the private fund manager is selecting service providers with the right expertise, credibility, independence, and infrastructure. It is also critical to ensure that the manager has a qualified person(s) to oversee and monitor the services being outsourced. Common areas often outsourced by private managers are legal, IT, regulatory/CCO, middle office operations, and accounting/CFO. Due diligence on each service provider should be completed by the manager, and then again by the end investor. Outsourcing thoughtfully can enable small managers to meet institutional operational due diligence standards.

Hedge Fund and Private Equity Fund Operational Due Diligence

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