/dd

Descriptions about my due-diligence on hedge fund managers in New York in 2011

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).