We advise clients as to the initial registration and notice filing requirements under both federal and state laws, as well as ongoing compliance and other issues relating to the operation of their business, including advice concerning investment advisory agreements, record-keeping, engaging in soft dollar transactions, principal and agency transactions, sub-advisory arrangements, allocation practices, insider trading policies and employment matters. We often guide clients through contract negotiations with retail and institutional investors, custodians, brokerage firms and solicitors.

ALTERNATIVE INVESTMENT DUE DILIGENCE PLATFORM

With the recent magnitude of fraud among hedge funds and other investment vehicles, investors are more aware than ever of the need to conduct thorough and independent due diligence. To protect their investments, investors must be proactive and verify the reliability of statements made by fund managers about operations, strategy, background and performance.

Whether an investor has already made an investment or is considering making an investment, we perform the necessary due diligence on all facets of a fund’s operations, management and investment strategy. The core of our due diligence practice focuses on three primary areas of due diligence review: legal, accounting and/or administrative & operational.

LEGAL

Our legal expertise gained from reviewing and drafting thousands of fund agreements enables us to precisely identify any shortcomings and problem areas in all types of fund agreements and documents. We prepare and issue an analysis of each of the agreements we review, which include (but are not limited to):

  • The private placement memorandum for onshore and offshore investments
  • Limited partnership agreement
  • Subscription documents
  • Separately managed account agreements
  • Operating agreements
  • Investment management agreements
  • Third-party marketing agreements

ACCOUNTING, ADMINISTRATIVE & OPERATIONAL REVIEW

As part of our accounting and administrative & operational review of a fund, we evaluate and confirm its investments by conducting retrospective and/or prospective asset verification. We contact the custodian, brokers, administrators and auditors of a fund to confirm the NAV calculation method, the balance of the account and more. This portion of our review also includes our assessment of the service providers used by the fund.

Based on our extensive dealings with fund service providers, we can determine whether certain service providers pose a level of risk to a fund and/or a fund’s investor. We provide the investor with our assessment of this risk level and guide them through various alternatives in the event the risk is deemed “high.” In addition to interviewing the service providers individually, we collect information from them to analyze the history of the fund’s relationships with its service providers, looking at such areas as rate of turnover and relationship agreements. The service providers we review include, but are not limited to, the fund’s:

  • Auditor
  • Administrator
  • Accountant
  • Prime broker
  • Custodian
  • Other brokers
  • Other banks
  • Law firms
  • Equipment leasing companies
  • Landlords
  • Board of directors

Depending on the investor’s needs, we can visit a fund’s principal place of business to perform a comprehensive review of their books and records, office space and equipment, staffing, and other relevant items. We also recommend performing a conflicts of interest review, which consists of several items, including a comparison of the fund’s responses to a due diligence questionnaire (which we provide) to the fund’s offering and marketing documents.