News

December 4, 2019

Learn about Corgentum's 2020 Operational Due Diligence Outlook at Our Next Webinar

With 2019 coming to a close, Corgentum Consulting announced today that it would be hosting a webinar to discuss the 2020 operational due diligence outlook for investors in hedge funds and private equity. The webinar will take place on Thursday, December 12, 2019 beginning at 10:30am EDT.

Key 2020 operational due diligence trends anticipated to be discussed during the webinar include:

Please signup here for the webinar .

Signup space for this webinar is limited, and priority access will be provided to premium subscribers of Corgentum's monthly newsletter, Due Diligence News . If you are not already a premium subscriber of our newsletter you can contact us to learn more.

November 5, 2019

Asian Venture Capital Journal and Corgentum Discusses Private Equity Operational Due Diligence Trends

With investors increasingly allocating to fund manager all over the world, operational due diligence has evolved into a global exercise. Emerging markets and Asia are increasingly area of particular interest among private equity investors. While certain private equity General Partner (GP) practices are effectively implemented the same regardless of where in the world the GP is located, other operational practices are customized towards more appropriate specific regional and country specific practices. To discuss these trends, Corgentum Consulting Managing Partner Jason Scharfman recently sat down with the Asian Venture Capital Journal. In an interview spanning across two articles (Operational Due Diligence : Query Parameters and Due diligence & Psychology: Internal Audit ) Mr. Scharfman commented on the ways in which investors can benefit from tailoring their ODD approach when analyzing private equity and especially Asian private equity managers. Other key points addressed in the article include:

  • the benefits of utilizing a multidisciplinary ODD process for private equity
  • trends in venture capital operational due diligence
  • regulatory analysis challenges facing Limited Partners allocating to Asian GPs
  • investigative due diligence approaches for Asian based private equity managers
Both articles are available on the Asian Venture Capital Journal website (subscription required)

September 10, 2019

Private Equity Law Report Discusses Corgentum's Investor Background Investigation Trends Study

Corgentum Consulting recently released the results of a survey of investor and operational due diligence analysts that analyzed trends in approaches towards investigating hedge funds and private equity funds. One of the findings from this survey was that investors are increasingly utilizing social media to research fund manager entities and key personnel.

The Private Equity Law Report recently discussed Corgentum's survey findings. The article, " Practical Tips for Investors Conducting Background Investigations of Private Fund Managers " discusses trends in investor investigative due diligence approaches including Corgenutm's insights on:

  • Ways in which investors are increasingly adopting the model of integrating their operational due diligence (ODD) and background investigation processes.
  • Increased focus on analysis of operational controls to prevent fraud
  • Warnings about potential liabilities around collected data
  • Practical guidance on designing an efficient and cost-effective background investigation program
The full articles is available on the Private Equity Law Report website (subscription required).

August 13, 2019

Investors Focus on Social Media During Hedge Fund and Private Equity Background Checks - Corgentum Survey Shows

Hedge fund and private equity operations continue to increase in complexity. As a reflection of this the process utilized by investors to perform initial and ongoing operational due diligence on funds has continued to grow in scope and depth. This trend in expanding the scope of investor due diligence efforts has also taken hold in the area of pre-investment and ongoing background checks on fund management entities and key personnel.

Corgentum Consulting released today the results of a new survey of investors and operational due diligence (ODD) analyst focused on investigative due diligence practices on hedge funds and private equity.

Key findings from the survey include:

  • 62% surveyed stated that within the past year that as part of the background investigation process they have begun to search social media platforms such as LinkedIn, Facebook, Twitter and Instagram
  • 38% of the respondents uncovered at least one negative item during social media searches that was omitted from more traditional investigations
  • 73% of those surveyed felt they would benefit from increasing the ongoing monitoring of fund managers social media on a post-investment basis
  • 84% of investors stated they would prefer notificaiton when a fund manager revises a filing such as the Securities and Exchange Form ADV, only 13% said that the information in these updates were useful, and 48% stated they found more benefit in increasing the scope of litigation and criminal searches instead.

Commenting on the results, Corgentum Consulting Managing Partner Jason Scharfman stated, "Investors increasingly want background investigations that dive deeper into the digital profiles of fund managers and their personnel. The focus is now on building a complete online and offline picture of the potential reputational risks involved with an investment. As a result, investors are increasingly integrating investigations into their larger due diligence and risk management frameworks." .

The survey was conducted as part of the Corgentum webinar series. Contact us to learn more about our upcoming webinars and our operational and investigative due diligence services.

August 7, 2019

Corgentum Discusses New Multi-Asset Risk Management Tools with FundFire

As hedge fund strategies become increasingly complex, both fund managers and investors have sought to develop more sophisticated tools to better analyze and monitor risk exposures. These tools run the gamut from re-evaluating existing risk management program inputs to implementing sophisticated software packages.

During the initial and ongoing operational due diligence processes collecting the appropriate information to facilitate benchmarking in this analysis is a critical for investors. Market volatility only can magnify the performance and position level swings in individual manager portfolios. Investors can benefit from ongoing dialogues with fund managers surrounding risk management. Additionally, a strong operational due diligence process can instill in a manager an investor's need for consistent portfolio transparency to better monitor investment and operational risk.

Corgentum Consutling Managing Partner Jason Scharfman discussed emerging trends developing in the area of multi-asset risk management tools with FundFire. "Risk management tools can facilitate transparency and more granular data reporting. This can benefit a fund’s investors seeking more detail on their exposures and it can facilitate their risk management,” he said. In the article Mr. Scharfman also comments on the use of risk management tools for both fund managers and investors to dive into sector, region and company risks more in real time and in greater detail.

The full article is available on the FundFire website (subscription required).

July 23, 2019

Join Us For the Next Corgentum Webinar on Background Investigation Trends for Hedge Funds and Private Equity Managers

Corgentum Consulting announced today that it would be hosting a webinar covering trends in investor background investigations of hedge funds and private equity managers. The webinar will take place on Wednesday, July 31, 2019 beginning at 10:30am EDT.

Topics anticipated to be discussed include:

  • Overview of the core areas typically covered during background investigations including criminal checks, news and social media reviews, litigation searches, regulatory searches, reviews of previous employment, professional certifications and educational background
  • Impact of big data analytics and artificial intelligence in background investigations?
  • What should the scope of investigations be? How should this change for initial versus ongoing investigations?
  • Guidance on determining which individuals at a fund manager to investigate
  • Approaches for investors to focus on cybersecurity efforts for maintaining data integrity and preserving confidentiality during and after investigations
  • Analyzing the impact of recent regulatory changes have on background investigations?
  • What influence do current privacy laws in the US, Europe and Asia have on the investigative due diligence process?
  • What is the impact of the General Data Protection Regulation (GDPR)?
  • What should investors do if they find negative information during an investigation?
  • How to best integrate your ODD and background investigations

If you would like to attend the webinar, please signup here .

Space is limited, and priority access will be provided to premium subscribers of Corgentum's monthly newsletter, Due Diligence News . If you are not already a premium subscriber of our newsletter you can contact us to learn more.

July 15, 2019

Corgentum Discusses SEC Restrictions on Corzine's New Hedge Fund With Bloomberg

When a new fund manager first launches and begins accepting outside capital from investors, there a number of operational startup challenges they face. For investors seeking to perform operational due diligence (ODD) on new managers, these specific startup risks are a core part of their due diligence process.

Once a manager begins to reach critical mass, and their Regulatory Assets Under Management (RAUM) rise above $150 million, managers that are subject to the jurisdiction of the US Securities and Exchange Commission (SEC) are then required to apply for registration with the agency. For investors, performing ODD on Registered Investment Advisers (RIA) requires a specialized understanding of the specific compliance policies, procedures and documentation RIA's must develop and maintain to be in compliance.

As part of the ODD process, many investors also perform background checks on key fund personnel and their fund management company. This investigative due diligence process can often yield insights into headline risks, reputational risks and historical disciplinary proceedings. After becoming a RIA, fund managers are then subjected to a number of additional regulatory and compliance obligations and restrictions. While the SEC usually approves most applications, this is not a foregone conclusion in all cases, particularly if a manager has a disciplinary record.

Jon Corzine is the former co-chairman of Goldman Sachs Group Inc. who had served as a U.S. senator and governor of New Jersey. He was also the former CEO of MF Global Holdings Ltd. a multinational futures broker and bond dealer, that failed in part due to large wagers on European sovereign debt. MF Global went bankrupt in October 2011, and in January 2017 Mr. Corzine settled allegations that he failed to properly supervise the firm by paying a $5 million penalty and consenting to the lifetime ban from the futures industry. Mr. Corzine launched a new hedge fund in early 2018, called JDC-JSC and has recently reported that its regulatory assets exceeded $600 million, which triggered an application for US SEC registration. It is being reported that the SEC is allowing this registration subject to a number of additional requirements and restrictions.

In an article in Bloomberg today, Corgentum Consulting Managing Partner Jason Scharfman discusses the regulatory and compliance challenges facing Mr. Corzine's new firm as part of this registration process. Among the reported requirements agreed to by the SEC are restrictions on proprietary trading, customer protections procedure requirements, and the requirement to hire an independent compliance consultant.

The full article "Corzine Accepts Prop Trading Ban in His Wall Street Resurrection" is available today on Bloomberg.

April 8, 2019

Join Corgentum at the Emerging Manager Forum in New York City

Emerging hedge fund and private equity particularly face a number of unique challenges in first designing and then managing their operational infrastructures. These challenges continue when nascent fund managers seek to explain their operations to prospective investors during the operational due diligence (ODD) process.

To discuss these challenges, Corgentum Consulting Managing Partner Jason Scharfman will be presenting at a session entitled, The Changing Operational Due Diligence Landscape at the upcoming Emerging Manager Forum 2019 - New York. The conference takes place from April 10 - 11th at the New York City offices of Grant Thornton. The operational due diligence session at which Mr. Scharfman is presenting will take place from 3:45pm - 4:30pm on Wednesday April 10th.

Topics anticipated to be covered during the presentation include:

  • New manager startup expense management and allocation considerations
  • Trends in operations and compliance management for emerging managers
  • The increased investor focus on fund governance and the role of board members
  • Techniques by which emerging managers can mitigate key operational risks
  • Guidance for emerging manager to effectively manager the onsite operational due diligence process

We hope to see you at the conference!

March 26, 2019

Corgentum Discusses Private Equity Compliance and Governance Trends with Fund Shack

Issues related to governance and compliance in private equity funds continue to garner attention from General Partners (GP's), Limited Partners (LP) and regulators. Corgentum Consulting Managing Partner Jason Scharfman recently sat down to discuss trends in this area with Fund Shack.

Topics covered during the interview include:

  • The evolving sophistication of private equity compliance frameworks as compared to hedge funds
  • GP conflict of interest considerations
  • The role played by Limited Partner Advisory Committees (LPACs) and other governance considerations
  • Analyzing the increasing role of GP compliance related expenses
  • Trends in fund specific terms and accompanying LP disclosures
  • Private equity regulatory trends with a focus on US SEC examination priorities for private equity and venture funds

The full interview is available on the Fund Shack website (signup required).

March 26, 2019

Research Update: Survey Shows Investors Re-emphasize Compliance and Cybersecurity During Operational Due Diligence

A new survey by Corgentum Consulting announced today, shows that both investors and operational due diligence (ODD) analysts in hedge funds and private equity managers feel that the scope, depth and complexity of ODD reviews has continued to increase. Specifically, 82% felt that this increased complexity has added substantial challenges to the ODD process over the last year.

Renewed Focus on Compliance and Cybersecurity

A large majority of those surveyed (79%) indicated that they are spending more time analyzing regulatory and compliance risks during ODD as compared to last year. Survey respondents indicated that the compliance and regulatory related areas that have received the most focus of late include:

Those investors and ODD analysts that participated in the survey also indicated a 59% increase in the overall time that they devoted towards performing due diligence on cybersecurity and related issues including the ongoing risks of phishing scams, email spoofing and social engineering attacks.

Are Operational Due Diligence Resources Keeping Up With Fund Manager Complexity?

A second trend that emerged from the survey results was that despite this increasing regulatory and cybersecurity complexity, the resources allocated to operational due diligence have not kept up commensurately. Specifically, 79% of respondents admitted that they have not increased operational due diligence resources to sufficiently keep up. This resource mismatch appears to not only be contained to initial pre-investment reviews, with 89% of ODD analysts that participated in the survey indicating that felt they did not have enough time or resources to thoroughly monitor operational risks on a post-investment basis. Furthermore, 68% indicated that they felt their background investigations on fund managers could be more rigorous.

“The data shows investors are being tasked with more complex operational due diligence challenges and that is straining existing resources. As the compliance and technology environments for hedge funds and private equity continue to evolve, allocators must consider how they will devote more resource toward operational due diligence to evaluate and monitor these risks going forward,” said Jason Scharfman, Managing Partner of Corgentum Consulting.

Corgentum conducted this survey as part of the firm's webinar series. The results were first presented exclusively to premium subscribers of Corgentum's monthly newsletter, Due Diligence News.

Would you like to be the first to know about our latest surveys and trending operational due diligence industry news? Sign up for our newsletter today!

January 15, 2019

Is your Operational Due Diligence Program Equipped to Handle New Regulatory Changes in 2019? Signup for Corgentum's Next Webinar to Find Out

2019 brings with it a new series of challenges for those seeking to evaluating operational risk in fund managers as part of the operational due diligence (ODD) process. Corgentum Consulting announced today that it will be hosting the first webinar in its 2019 series. This webinar will focus on emerging trends in investor operational due diligence (ODD) approaches for hedge fund and private equity for 2019 with a key focus on updates on US SEC and UK FCA regulatory exam priorities. The session will take place on Wednesday, January 23, 2019 beginning at 10:30am EDT. Signup today!

Topics that will be covered during the webinar include:

  • How to develop and implement an action plan for effective ODD in 2019

If you are interested in attending the upcoming webinar, please signup here .

Space is limited, and priority access will be provided to premium subscribers of Corgentum's monthly newsletter, Due Diligence News . If you are not already a premium subscriber of our newsletter you can contact us to learn more.

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