Consulting Services: Due Diligence/Manager Analysis
"Due diligence" refers to the process of carefully examining the factual
claims made on behalf of an investment program to insure accurate and complete
representations by managers. Unfortunately, many alternative investments are
exempt from federal regulation, which means that due diligence examinations
are an essential function of investment professionals.
Spectrum has the background and experience required to conduct a professional
due diligence investigation. Our principals' experience in public accounting,
asset allocation and fund management makes Spectrum the ideal choice for such
important due diligence functions as:
- qualitative and quantitative manager analysis
- verification of performance history
- strategy analysis
- risk analysis
- counterparty risk
- strategy risk
Manager Evaluation
Although a key goal in manager evaluation is to estimate the likely range of future returns,
other factors such as risk and the correlation to other strategies are also analyzed. Although the process
is unique to each manager and strategy, the following are some of the qualitative and quantitative
factors Spectrum reviews when analyzing managers.
- absolute and risk adjusted performance
- performance relative to peer group
- correlation to peer group and other strategies
- correlation to underlying assets
- investment strategy and process
- performance during unusual or unique market conditions
- market conditions during period of track record
- liquidity, transparency and risk management
- quality and stability of key personnel
- capacity of the manager and the strategy
- commitment of the
principals and conflicts of interest
The goal of this process is to develop an estimate of the future perfomance of the manager,
in terms of both retrun and risk, and to develop an in-depth understanding of the manager's investment
process and the conditions under which he will prosper or suffer. This information is then considered in
the context of the investor's preferences to select managers for inclusion in the portfolio.
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