Hedge fund operational due diligence since 2009.

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Current Operational Trends for Managers


  • Distinct middle office/operations team with experience settling and valuing the types of instruments held by the fund.
  • Middle office portfolio management  systems with a built in auto-reconciliation function.
  • Daily automated in-house cash and portfolio reconciliations to all banks and custodians. 
  • Use of automation and third party vendors for trade confirmations, corporate actions, reconciliations, and pricing.
  • Documented policies & procedures on fund operations and fund accounting.
  • Maintenance of in-house parallel portfolio accounting, fund accounting, and shareholder allocations.
  • Independent review of every LP statement prior to release by the fund administrator.


  • Documented policies & procedures for deal due diligence, loan underwriting, ongoing fair valuation, and funding.
  • Independent fair valuation oversight (at a minimum an internal CFO, but ideally a recognized independent valuation agent).
  • Third party valuation checks should be set at a routine frequency e.g. semi-annually.
  • Independent fund administration i.e. independent deal review and loan servicing.


  • Segregation of investment portfolio from operating cash. 
  • Dual signatures and/or online authorizations on all fund wires.
  • Investor capital flows processed by fund admin through a fund admin controlled bank account. 
  • Fund expenses paid by independent fund admin through a fund admin controlled bank account.


  • Use of cloud services and software as a service provides new efficiencies in cost and cyber security. 
  • Video conferencing and messaging systems provide better communication for global interaction.


  • Initial employment background checks, and ongoing annual staff background checks for key persons and cash signatories.
  • Discretionary and firm based compensation, vs. individual performance based compensation.
  • Systematic and merit based hiring process. 
  • Use of committees and minuted committee meetings.
  • Existence of liability and errors and ommisssions insurance and HR training.

Hedge Fund and Private Equity Fund Operational Due Diligence

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