Our Level 2 policy & procedure review, testing and reporting services are an add-on to the Level 1 non-investment
due diligence research and reporting that we provide. Our team will go on-site to the potential underlying manager to review and
selectively test adherence to their compliance and trading valuation procedures. It should be noted that these services do not include
making any sort of investment recommendations.
We start by working with our clients to develop a policy and procedure due diligence review infrastructure
that meets their needs including working with clients to assign risk ratings for underlying hedge funds
in a portfolio. For each potential underlying fund manager, we then request copies of
certain documentation and written procedures. After a detailed review of this information, the
operational review takes place, where we will focus on some or all of the following:
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Testing and review of brokerage, money control and trading policies and procedures
- Review and test trading authority
- Review and test money movement controls
- Review and test allocation procedures
- Review and test trade error procedures
- Review soft dollar usage and test review policies
- Frequency and accuracy of investor reporting
- Testing and review of compliance procedures and infrastructure
- Experience and work history of CCO
- Review and test various written procedures
- Code of Ethics / personal trading
- Gifts / outside activities
- Conflicts of interest
- Proxy voting, etc.
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Review and testing of accounting, NAV and investor reporting processes and procedures
- Experience and work history of CFO
- Detailed review of how performance and NAV are calculated
- Testing of valuation control procedures
- Review of manager's role and discretion in calculating valuation
- Review of any audit issues related to NAV calculation
- Frequency and accuracy of investor reporting
- Review of fee calculation
- Who calculates fees?
- Is there an independent check?
- Have there ever been errors?