Operational Due Diligence

An excerpt from the following link provides a low dose of fresh language for due diligence:

www.naturaltraining.com/blog/2005/08/13/wanted-your-brains-not-your-slickness/

Icing the due diligence cake
With the ever widening array of hedge fund companies and investment products available it makes sense for investors to spend time weeding out unsuitable prospects.

Many fund of fund managers now have a comprehensive due diligence policy. This includes factors such as sending questionnaires to the hedge fund, investigating their processes and running a question and answers style “beauty parade”.

This allows them to control the process from start to finish.

More and more companies are chosen on merit as the result of proper research. By the time the presentation comes, they have all but made their decision.

Stephen Holt of Threadneedle Asset Management thinks the onus is on the fund of fund managers to drive the process of due diligence. “It’s better to spend the time upfront on the true aims and objectives of the fund than leave everything in the hands of one presentation”.

The due diligence process won’t go away, and nor do we want it to. It is in effect your sales process. If care and good management of this process is undertaken by your team, then the presentation should be the icing on the cake.

Should be…but there are a number of times presentations have fallen over at the last hurdle.

Your prospective clients want to see the results of their time and effort backed up by the presentation content and delivery – so spend the time to ensure you aren’t letting yourself down.

After the due diligence, it’s up to you to let your professional style come across in a compelling and engaging manner. A good presentation is the icing on the cake.

If you can do this then you’re well on your way to securing the deal. If not, the poorly prepared, formulaic presentation may stick in their minds.

So, while due diligence is important, don’t underestimate your ability to provide trust and a natural flavour of your team at this last crucial stage.

The Channel Islands are a cluster of islands in the English Channel, and are often used by the UK investment industry the same way that the Bahamas are used by the US. In attempting to verify that a UK company was also doing business out of Jersey (one of the islands), I found the following link to the Jersey Financial Services Commission: http://www.jerseyfsc.org/index.asp

Once there, click on the links at the top of the page (I found this particular company under the “Funds” tab.) Then click on “Regulated Entities”. From there you can either look through a list or search for a particular name. While browsing, I saw several entities associated with companies that we have investigated before.

I’m not sure how often we will be able to utilize this, but it might be a nice addition to our UK reports.

While updating the database, I have come across a few reports which state that degree verifications are still pending. It has always been my practice to avoid archiving such reports until I receive the verification from the school, as it is easy to lose track of the status of a report once it has been archived. If I haven’t heard back from the university after a few days, I will call the client to let them know that the degree is still pending, and I give them the option to have the report uploaded as is with the promise that the report will be updated as soon as the verification is received.

Perhaps we should all hold off on archiving reports until all parts of the investigation are complete.

To what extent is media used to confirm an individual’s past employment with a company?

My rule of thumb is to only use media articles wherein the individual is referred to as being from a particular company. If the article also states that the individual was previously with another company, I will use that as well.

My issue in regards to confirming past employment with media pertains to online bios. I tend to disregard employment information included due to the fact that these online bios are often the same bio provided to us by the client. I generally find these online bios to be very unreliable as far as confidently confirming past employments. Any opposing opinions?

Use caution when simply bringing forward information from a past report. I’ve just started one where it appears that the education was never verified, and although the manager reported prior employment at two places we can easily verify automatically, no records were found either. All the old report consisted of was an address history. After doing some digging, I was able to find the correct person that matched the bio.

I’d advise to be suspicious of such reports, and orient yourself with how the prior investigator came to the conclusion that their person matched the subject.

I have been working on a report which entailed performing two degree verifications. While one (an MBA) came back positive, a verification request for the undergrad degree came back negative. I contacted the client to let them know, and today received an email from the manager being investigated. He gave me additional information (ie his last name actually consists of two names, which I was unaware of as most of the sources I utilized only had one last name displayed for him). I resubmitted the request, but felt a little uncomfortable replying to the manager and instead sent an email to the client only, stating that a new verification request was being processed. Does anyone have an opinion on communicating with the target of an investigation?

How long will Sam last? They all get caught eventually.

Please see the discussion thread on Sam Israel already started elsewhere on this site. Please Comment/Reply with the names and plights of other fugitives that investment scams.

The “Chartered Financial Analyst” program is administered by the CFA Institute. This organization is very particular about who can claim the title of “CFA” after their name.

See http://www.cfainstitute.org/

We do find a fund manager who claims to hold a CFA, but is not entitled to that title. Typically they have either not completed their studies, or have not kept their dues and credentials up to date.

We can only verify education when we know which institution to contact. A resume or biography will usually contain this information. Most institutions in the US do not require signed consent to verify education.

I have received nothing but positive feedback on our new practice of contacting clients when detrimental records are found on a manager and/or company. However I ran into an interesting situation today, where the client had ordered a quick access report along with a new report. A detrimental record was found during the previous investigation of the individual, which the client saw when viewing the quick access report. My question is, should we still contact the client about a detrimental record found if they are already aware of this from viewing a quick access report? (For the record, I still contacted the client.)