The Role of Operational Due Diligence in Today’s Fundraising Environment

Operational Due Diligence (“ODD”) is an integral part of winning institutional investment allocations. Being aware of the current focus areas and what is on the horizon is key to preparing your organization. 

Michael Merrigan from Shadmoor Advisors sits down with Frank Napolitani, Director at EisnerAmper, to discuss what managers can expect when undergoing operational due diligence. He discusses best and worst practices, the popularity of mock SEC exams, what to expect from an onsite ODD visit, the perceived increased risk of allocating to an emerging manager and how emerging managers should address this.

Mike Merrigan discusses the importance of operational due diligence for fundraising, what he would consider “red flags” or “deal breakers,” and how ODD professionals work with managers constructively. What is the importance of ODD in a fundraising environment?

How can a manager prepare for an ODD review? Mike discusses what managers can expect in terms of deliverable requests, due diligence questionnaires and onsite visits.

Operations: Mike discusses what ODD professionals expect from small and large funds in terms of their operations – from selection of service providers to legal/compliance to outsourcing.

What is an acceptable/attractive fee-expense ratio and how should managers be thinking about break-even analysis?

Closing out the conversation, Mike discusses the ever-changing PB landscape, fund administrators, and how operational due diligence varies for separately managed accounts vs. funds.

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