Research

Corgentum – The Advantages of Having a Local Hedge Fund Operational Due Diligence Presence

This paper provides an overview of the benefits of Corgentum's local presence in the heart of the New York area’s hedge fund community. Corgentum’s local knowledge and expertise provides our firm with significant insights for managers based in New York, Connecticut, New Jersey and the surrounding areas. This local presence compliments our firm’s broader global hedge fund coverage.

Hedge Fund Operational Due Diligence Education Series -
Analyzing Hedge Fund Valuation Practices

This paper provides an overview of the multifaceted process by which Corgentum analyzes a hedge fund's valuation practices. This piece also outlines some key questions investors should consider when evaluating the approach a hedge fund takes towards valuation including the independence of the process, pricing inputs utilized and the role of the administrator as well as any third party valuation consultants.

Hedge Fund Opearational Due Diligence:
The Madoff Effect – An Analysis of Operational Due Diligence Trends

This study which quantifies investor trends in hedge fund operational due diligence as a results of frauds such as Madoff as well as pending financial regulation. The study is entitled, Key findings from the study include:

Post-Madoff investor due diligence reviews of hedge fund cash management policies and controls has increased by almost 60%

The role of the board of directors of offshore funds is dangerously minimized with less than 2% of investors covering these items during due diligence

Reviews of information technology infrastructure, personnel turnover and the quality of overall operations management also tend to be overly minimized by investors during operational

In anticipation of stricter hedge fund regulation fund of hedge funds are focusing the bulk of their due diligence efforts on legal, compliance and regulatory risks

A Madoff Effect has developed in hedge fund due diligence causing an increased investor focus on:

cash controls
quality and length of relationship with service providers
transparency and reporting

For this study Corgentum collected data from over 200 global hedge fund allocation organizations including fund of hedge funds, endowments, foundations, corporate pensions, family offices, large independent financial advisory practices and private banking organizations.

Corgentum - Working With Investors To Evaluate and Monitor Operational Drag^® in Hedge Funds

This piece provides an introduction to the concept of Operational Drag^®, the negative effects of operational risks on the efficiency of an organization. This paper also outlines how the Corgentum hedge fund operational due diligence process goes beyond fraud detection to work with investors to analyze and monitor Operational Drag® in hedge funds in order to reduce our client’s exposure to hedge fund operational inefficiencies.

Corgentum - Independent & Unbiased Hedge Fund Operational Due Diligence

An overview of the importance of independence and objectivity in the Corgentum hedge fund operational due diligence process. This paper also outlines the benefits of Corgentum's sole focus on operational due diligence as well as the benefits of Corgentum's multidisciplinary approach.

Hedge Fund Audited Financial Statement Reviews During Operational Due Diligence

This paper provides a discussion of the importance of audited financial statement reviews as part of the broader hedge fund operational due diligence process. Additionally, this paper provides a list of key questions investors may want to consider when reviewing audited financial statements.

Hedge Fund Operational Due Diligence Questionnaire: To Use or Not To Use?

An overview of the role due diligence questionnaires ("DDQ's") and request for proposals ("RFP's") play in the hedge fund operational due diligence process. This paper also outlines some key questions and other considerations investors should bear in mind before asking a manager to complete a customized due diligence questionnaire.

Hedge Fund Operational Due Diligence: An Absolute or Floating Standard?

An overview of the pros and cons of applying absolute best practice and floating standards towards hedge fund operational due diligence. While an absolute best practice standard facilitates uniformity in comparing operational risk information, this methodology can suffer from rigidity. A floating standard can better accommodate the particularities of hedge funds operating in different regions but runs the risk of being overly flexible.

Hedge Fund Operational Due Diligence Education Series -
Information Technology Due Diligence

This paper discusses the often overlooked nature and importance of incorporating a review of a hedge fund's information technology infrastructure into the investor operational due diligence process. Specifically, the information technology topics discussed in this piece include a review of a hedge fund's hardware, software, business continuity and disaster recovery and information security.

Hedge Fund Operational Due Diligence Education Series -
Evaluating Your Hedge Fund's Administrator

This paper discusses several key questions investors can utilize to evaluate their hedge fund's administrator. Other topics addressed in this paper include the importance of understanding the nature of the administration services being provided, the need to monitor the on-going relationship between the hedge fund and the administrator and the diagnostic process concerning the role played by the administrator in the overall valuation process.

Information Overload Red Flags - When a hedge fund doesn’t know when to say when to due diligence information requests

This paper discusses the importance of understanding and diagnosing the hedge fund due diligence document distribution process as part of the overall operational risk evaluation of a hedge fund manager. Questions posed by this paper for investors to consider include: Are response requests pro-active or reactive? and How is investor information protected?

Hedge Fund Service Provider Due Diligence: A Window Into Operational Risk

This paper outlines the importance of conducting thorough due diligence on a hedge fund's service providers.

Private Equity and Real Estate Operational Due Diligence

An introduction to Corgentum’s private equity and real estate operational due diligence and operational risk service offerings.

Jack of all trades or master of none? - The benefits of multi-disciplinary operational due diligence

This paper discussed the benefits of utilizing a multi-disciplinary approach to operational due diligence and cautions against the risks associated with myopic self-limiting approaches.

Has Rigor Mortis Set In On Your Due Diligence?

This paper outlines the benefits of adding an element of flexibility to operational due diligence approaches and cautions against overly rigid operational risk methodologies. Such flexibility often sheds more light on the operational risks already uncovered during standard methodology reviews.

Ten Questions Every Investor Should Ask Their Hedge Fund Manager: Operational Risk

In the post-Madoff environment many hedge fund investors, both institutional and ultra-high net worth, are taking an increased responsibility for overseeing their own due diligence. Hedge funds should be addressing operational risk across a multitude of different operational risk factors. This paper outlines ten questions every hedge fund should be able to not only answer, but explain why they made certain operational choices which led to these answers.

Thinking outside the box - Seven innovative due diligence techniques

The nature of due diligence is changing. In this new environment, investors need to be innovative in their approach to due diligence. This paper outlines several innovate hedge fund due diligence techniques.

Preparing for the operational due diligence visit: A hedge fund's guide

As a result of the current economic environment and frauds such as the Madoff scandal, hedge fund investors have placed an increased importance on performing detailed operational due diligence reviews.This paper outlines a few key steps a hedge fund can take to ensure that they are adequately prepared for an operational due diligence review.

Analyzing Operational Due Diligence Frameworks In Fund Of Hedge Funds

This study outlines the results of the analysis of the operational due diligence frameworks in place at over 275 global hedge fund allocators including fund of hedge funds. By developing an understanding of the operational due diligence structures in place, this paper establishes a transparent benchmark against which operational due diligence frameworks may be compared.

The findings indicate there is a substantial variety present in the operational due diligence frameworks utilized. On a global basis, a myriad of hybrid approaches are in place at smaller allocators. Regionally, while a dedicated approach to operational due diligence is generally favored, no one framework emerged as a clear global leader. As compared to smaller allocators, larger organizations seemed to have more resources dedicated specifically to operational due diligence. These findings are consistent with predictions that hedge fund allocators such as fund of hedge funds, in part driven by investor demand, will continue to allocate more resources to underlying hedge fund manager operational due diligence.

Hedge Fund Regulation Doesn't Matter: An Artifical Operational Due Diligence Floor

The new proposed hedge fund regulations suffer from a number of missed opportunities to raise operational due diligence standards for both "professional" hedge fund allocators such as fund of hedge funds and consultants as well as for individual investors. This paper provides an overview of some of the primary shortcomings and pitfalls of the proposed legislation.