Operational Due Diligence and Fund Documentation
Free CAIA Level II lesson in Due Diligence and Selecting Managers. 30 min read, ~4,432 words.
Operational risk sits in a separate bucket from investment risk because the failure modes differ. Feffer and Kundro (2003) studied more than 100 fund liquidations over a 20-year period and attributed about half of all fund failures to operational risk. Operational due diligence (ODD) evaluates operational risk so investors avoid...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- fund selection lifecycle
- return persistence
- manager selection process
- screening questions
- historical performance
- manager selection sourcing
- fund culture
- investment monitoring
- market loss failures
- leverage behavioral
- trading tech crises
- fraud failures
- tail event lessons
- investment dd overview
- investment strategy mandate
- implementation risks
- custody valuation
- risk alert third party
- portfolio risk review
- warning indicators
- ops risks remedies
- key operational activities
- cash mgmt movement
- external parties principals
- fund compliance
- onsite visits meta risks it
- emerging managers
- funding applying concluding
- digital asset dd
- document collection
- manager investor relationships
- structural review
- liquid fund terms
- side letters
- ppm
- fund fees expenses
- audited financials
- bcp dr insurance
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