This article has been republished with permission from Cayman Funds.
Managers facing due diligence meeting requests from potential investors should consider the ways they can differentiate themselves and set a tight agenda, said investor panellists at the GAIM Ops Cayman meeting taking place this week.
What potential investors want is to meet the head of the operations team, as well as senior and junior personnel, in order to get a true feel for the processes that are in place.
Setting the agenda in advance is a useful exercise, because the meetings can cover a lot of ground and you don’t want to spend time going over what has already been covered in due diligence questionnaires. Essentially the manager must not make the investor feel they are going through the motions of a standard format.
“We want to get through the process but it needs cooperation,” one investor said. “We will help the manager but it’s a two way street.”
For funds of funds, while there has been significant pressure on that market segment, there are some benefits to be considered, namely liquidity reports and negotiating side letters and most-favoured nation (MFN) clauses. Funds of funds also do a great deal of risk reporting, so they are well in tune with the risks of their underlying managers.
“We are OK with fees on size if someone is putting down $100 million, but we don’t want preferential fees for liquidity and we don’t want to be the last one holding the bag,” the fund of fund investor said.
With emerging managers, it is possible for investors to have considerable influence over the documents and the ideal situation is to get in early enough to make the changes required, without having to wait for side letters.