Stone House Consulting is pleased to offer training in conjunction with Financial Technologies Forum.
Surviving a Hedge Fund Operational Due Diligence
Course Summary
The course is taught primarily for the benefit of the emergent investment manager preparing for a first-ever due diligence review as well as the well-established manager looking to improve the process. Yet many past participants have been due diligence firms, fund-of-fund managers, investment consultants and large investors seeking to ensure their due diligence process is up-to-date and to develop a greater understanding of the inner workings of an investment management firm.
The full course consists of seven sessions (each sold separately—cost $99 per session) with an optional eighth session focused on Q&A. It will take place every Tuesday at 1 pm ET from 26 October 2010 through 14 December 2010 and will be recorded for viewing on demand. Participants enrolling in all seven sessions can attend the optional Q&A session (Session VIII) on December 14th free of charge. (Session VIII may be purchased separately if desired.) Each session is targeted for 60 minutes including Q&A, though we highly recommend participants schedule one hour and 15 minutes in the event there are a large number of questions. At the conclusion of each session, a quiz will be held.
To date, most operational due diligence reviews are conducted on alternative investment managers, though this course covers traditional investment management as well and highlights areas where common practice differs between the two. Further, the course’s best-practice recommendations draw on operational models from both sides of the investment management business to help participants understand where the market may be headed for longer-term operational models.
Wherever possible, Ms. Miller draws from real-life examples on areas to examine, issues to consider and questions to ask. She provides practical insight and advice for firms large and small. Recommendations cover the expectations and capabilities for a large firm and what might be possible for small, start-up organizations. In addition, wherever possible, Ms. Miller includes day-to-day suggestions and recommendations for firms seeking to register with the U.S. Securities & Exchange Commission in terms of the recordkeeping, workflows and oversight required to support a registered investment advisor.
Each class will follow the following structure:
- Overview of the topic(s)
- Recommendations
- Best practices
The following sessions will be held:
II—Investment Philosophy, Decision-Making Process and Risk Management
III—Overview of Investors, Fund Structure, Communication and Subscription/Redemption Processing
IV—Key Vendors/Service Providers, Primary Counterparties and Legal/Compliance Oversight
V—Technology
VI—Operations
VII—Pricing, Fund Accounting, Client Billing and Performance Measurement
VIII—Q&A
A description of each session can be found below.
Session I—Introduction and Firm Overview Enroll in Session I
The first session will cover an introduction to the course as well as an overview operational due diligence. This session will also focus on client/investor objectives in conducting a due diligence review and will make general recommendations for managing a due diligence meeting. In addition, the session will cover what most commonly is the opening agenda item for a due diligence meeting, specifically an overview of the investment management firm.
Session II—Investment Philosophy, Decision-Making Process and Risk Management Enroll in Session II
An effective operational due diligence relies heavily on a proper understanding of a firm’s investment philosophy and decision-making process as well as the instruments and strategies in which a manager invests. Without this knowledge, the client/investor cannot evaluate whether an appropriate operational infrastructure exists to support the investment program. Additionally, investment risk management relies heavily on data that is collected and maintained by operational and IT teams.
Most course participants initially question the value of this segment of the course since their focus may be on operational and IT areas. By the end of the course, they are very pleased it was included.
Session III—Overview of Investors, Fund Structure, Communication and Subscription/Redemption Processing Enroll in Session III
In the third session, we cover some of the questions clients/investors ask about fund structure—as well as separate accounts—and then delve into the manager’s current client/investor base, communication and reporting and the subscription/redemption process.
Session IV—Key Vendors/Service Providers, Primary Counterparties and Legal/Compliance Oversight Enroll in Session IV
The focus of this session is on key vendors and service providers the manager and/or fund might engage as well as trading counterparties (including the distinction between a trading counterparty and a prime broker). The session will also cover client/investor expectations for legal and compliance oversight within the investment management firm.
Session V—Technology Enroll in Session V
Both technical infrastructure and business application technology are the topics covered in Session V. This session will also discuss business continuity planning (aka disaster recovery). A description of the types of applications generally employed to support both traditional and alternative investment managers will be provided, areas of particular risk and why some managers may—or may not—have different types of applications.
Session VI—Operations Enroll in Session VI
During the review of operations, the session will cover the life-cycle of a trade from the point when an order is contemplated until the trade has settled and a new position has been established. This session also includes voluntary and involuntary corporate actions, income processing and factor updates.
Session VII—Pricing, Fund Accounting, Client Billing and Performance Measurement Enroll in Session VII
The final session of the live series covers pricing, fund accounting/fund administration and client billing for separate accounts. Performance measurement will discuss fund- and/or portfolio-level performance, contribution to return and performance composites as well as the Global Investment Performance Standards (GIPS®). In addition, performance attribution will be covered at a high-level.
Session VIII—Q&A Enroll in Session VIII
For participants enrolling for the entire course (rather than individual sessions), an optional eighth session is offered (at no extra charge) for live Q&A with the course instructor, Holly Miller, founding partner at Stone House Consulting, LLC. A live Q&A will be offered every 4-6 weeks based on demand. This is particularly helpful for participants who were unable to attend live sessions (each with a Q&A period at the end of the session) as well as those participants whose questions arose only after the live session ended.
Participants enrolling only for individual sessions must purchase Session VIII separately.