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AIMA publishes due diligence questions for selecting a fund of funds manager


Date: Wednesday, June 3, 2015
Author: AIMA Press Release

London – 3 June 2015: The Alternative Investment Management Association (AIMA), the global hedge fund industry association, has published an updated edition of its due diligence questionnaire (DDQ) for pension funds and other investors to use when selecting a fund of hedge funds manager.

 

The AIMA DDQ for Funds of Hedge Funds Managers is used by prospective investors prior to making an allocation and is considered to be the industry-standard template. By having a standardised set of questions, the DDQ also helps managers of funds of hedge funds to respond efficiently to requests for information from multiple investors.

 

The DDQ includes questions related to the management firm’s investment philosophy and style, governance practices, operational infrastructure and risk management procedures, and potential conflicts of interest.

 

AIMA said there was strong demand for an updated version to reflect regulatory changes since the DDQ was previously updated in 2009, including the Alternative Investment Fund Managers Directive (AIFMD), which took effect in 2014, and other matters of interest to regulators such as dealing commissions and cybersecurity, as well as the September 2014 update to AIMA’s flagship Hedge Fund Manager DDQ.

 

AIMA consulted with a broad range of hedge fund managers and institutional investors during the drafting of the new DDQ and their input was integral to the new revisions.

 

Jack Inglis, AIMA CEO, said: “The due diligence process continues to be the single most important step that investors in funds of hedge funds can take to safeguard their investments. This is why our Questionnaire for the Due Diligence of Funds of Hedge Funds Managers remains an absolutely critical tool for investors.”

 

He added: “The publication of this updated DDQ comes at an interesting time for the funds of hedge funds sector, which despite a challenging period during the financial crisis still comprises approximately one-quarter of total hedge fund industry assets worldwide. With many pension funds and other investors exploring the feasibility of investing in funds of funds for the first time, we hope that this updated questionnaire will prove a useful tool during the vitally important due diligence process.”

 

AIMA’s full suite of DDQs, launched in 1997, covers the selection of hedge fund managers, CTAs, fund of hedge funds managers, clearing members, prime brokers and administrators. They are available for AIMA members only and may not be transferred to any other party.

 

- Ends –

 

Notes to editors

 

AIMA’s Illustrative Questionnaire for the Due Diligence (DDQ) of Funds of Hedge Funds Managers is only available to AIMA members.

 

The DDQ is a tool to assist investors when considering whether or not to invest with a hedge fund manager or in a hedge fund.  It helps investors to better understand the following before they invest:

 

•          the trading strategy, including how ideas are generated, the primary sources of return, the products and markets traded and how these products are used within the trading strategy;

•          the investment manager’s background, organisation and resources;

•          the fund’s terms, structure, governance, performance and tax treatment;

•          the effectiveness of the investment manager’s controls and the processes for managing and controlling market, liquidity and operational risk;

•          the third party service providers responsible for supporting the funds and the investment manager;

•          developing trends in the regulatory environment and their potential implications.

 

Not all of the questions are applicable to all managers but AIMA recommends that investors ask sufficient questions and request associated supporting material so that they are able to make an informed decision.

 

For media enquiries, please contact:

Dominic Tonner, Director, Global Head of Communications, AIMA

Tel: +44 20 7822 8380

Email: dtonner@aima.org

 

About AIMA

The Alternative Investment Management Association (AIMA) is the global hedge fund industry association, with over 1,500 corporate members (and over 8,000 individual contacts) in over 50 countries. Members include hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms, investors, fund administrators and independent fund directors. AIMA’s manager members collectively manage more than $1.5 trillion in assets. All AIMA members benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals, and its excellent reputation with regulators worldwide. AIMA is a dynamic organisation that reflects its members’ interests and provides them with a vibrant global network. AIMA is committed to developing industry skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the industry’s first and only specialised educational standard for alternative investment specialists. For further information, please visit AIMA’s website, www.aima.org.