For more on the topic, watch the full virtual meeting with Ferry,
Kevin Hirst
and
Christine Tamms, M.S.
from the Private Funds CFO Network.
- Operational Due Diligence Processes: Analysis of key documents and data, formal background checks, manager meetings, follow-ups and feedback and final report and IC review. Final report output varies across ODD teams but will include a risk rated scoring. Transparency and access to the right people makes the process run more efficiently. ODD teams review a large selection of managers annually and use data analytics to benchmark managers against their peers and offer free consultancy services on best practices. ?
- Current ODD Landscape: Outsourcing: of key operational functions due to growing number of providers, more cost effective and greater access to experts; Regulator Environment: Greater focus on conflicts of interest, demands for operational resiliency and cybersecurity measures and heightened focus on disclosures and transparency.
- ODD on Emerging Managers: Common engagement areas include compliance and cybersecurity. Implementing the correct policies and training staff is key to establishing effective programs. Typical costs that an Emerging Manager may incur for outsourcing fund administration, compliance, cybersecurity and for insurance coverage were highlighted.
- Use of Technology: Digital tools and third-party providers for DDQ management and background check monitoring are employed to streamline the due diligence and improve efficiency. AI is being explored for financial statement and document reviews, indicating a trend towards integrating advanced technology in due diligence processes.
- Challenges in the ODD process: Lack of transparency and access to documents such as compliance manuals and SEC correspondence, meeting with the correct people who can speak to the policies and procedures in place and not being receptive to feedback. ODD teams want to be a partner to managers and help them enhance their operational capabilities for the benefit of all investors.
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