dd's Introduction

Due-diligence

I conducted due-diligence on nine hedge fund managers in New York with my colleagues and analysts at Albournce from April 23, 2011 to April 30, 2011. I wrote a full report about it, which obvisouly I am not allowed to share with here. Probably listing up questions in that report would be the best I can do to give you sense of my work.

Relevant working experience: January 2010 to February 2013 as a risk manager at Korea Investment Management (Seoul, KR)

Questions in the due-diligence report

1) How to calculate portfolio NAVs

Is NAV pricing calculated by an independent fund service?
What is your internal process when discrepency occurs in NAV pricing between your firm and the independent fund service?
Historical records of re-announcing NAVs.
- According to Stephen Brown(2011), 10% of hedge fund managers in average modifies a portfolio NAV at least once.

2) Money transaction control

The number of signatures required to complete money transactions.
- According to Stephen Brown(2011), an average of 1.7 signatures is needed.
Limitation of receipiant imposed
Existance of the 3rd-party reviewing money transactions

3) Fund structures

General information such as prime brokers, auditors, undisclosed investment activies in feeder funds (rather than mother funds) and etc.

4) Operational Risk

A turnover ratio
Is your auditor one of Big 4?
History of changing prime brokers, auditors and custodian banks.

5) Market/Credit Risk

Your definition of leverage
Limits on leverage
How to leverage (Creditline? Colateral? Derivatives?)
Limits on loans
Risk limits (on single positions, concentrations, country or sector levels and etc).

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