Due Diligence Policy

Castle Hall works with many of the world’s leading investors in deploying effective operational due diligence which begins with the creation of a due diligence policy. Policy documents need not be complex, but should consider factors such as:

  • Reporting lines for operational due diligence within the Asset Owner’s governance framework, including reporting to Trustees, investment committee and other decision making bodies;
     
  • Scope of operational due diligence across the business risk of the investment manager, legal risk of any fund structure, and operational risk of the control environment;
     
  • Determination of risk based criteria to support the implementation of the due diligence program, considering (i) investment strategy (hedge funds would be considered to be more complex than long only managers); (ii) investment manager characteristics (assets under management, headcount, operating history, etc.) and (iii) capital invested (small allocations below a dollar threshold may merit more limited diligence oversight; material allocations even to “lower risk” managers may merit more detailed procedures given capital at risk.)
     
  • Diligence procedures available at each of the screen, onboard and monitor stages of the investment process, including desk reviews, onsite visits etc.;
     
  • Incorporation of external information to support the diligence evaluation, such as audited financial statements, GS 007 reports, manager supplied due diligence reports and other information;
     
  • Evaluation of current and envisaged regulatory criteria to ensure that diligence procedures meet regulatory obligations and expectations;
     
  • Identification of veto criteria which would result in an asset manager and / or a specific investment fund becoming uninvestable for the asset owner;
     
  • Process to monitor and update the due diligence process on a periodic basis.
     

Castle Hall can provide consultative support to each SuperDiligence client to assist in the creation of a risk based operational due diligence policy which reflects the specific characteristics of each client and their investment program.