Since 2008, I've seen more investors increasingly allocating to hedge funds and managed futures. As my background is research, this article discusses the research side of the due diligence process.
Over the years I've found investors perform varying degrees of due diligence of hedge funds. Some may only crunch the returns of the manager. Others will only ask the manager to fill out a due diligence questionnaire and some will do a full due diligence process on the manager including research and operational due diligence. The first two points listed are good places to start, but is not the ending point as your goal is to get as close to a full due diligence process as possible.
Regarding the research/strategy component of due diligence, below are five major components to keep in mind when performing due diligence on a manager:
Copyright ©2013 Mark Shore. Contact Mark Shore for permission for republication at firstname.lastname@example.org Mark Shore has more than 25 years of experience in the futures markets and managed futures, publishes research, consults on alternative investments and conducts educational workshops. www.shorecapmgmt.com
Mark Shore is also an Adjunct Professor at DePaul University’s Kellstadt Graduate School of Business, where he teaches the only known accredited managed futures course in the country. He is also a Board Member of the Arditti Center for Risk Management at DePaul University.