Hedge Fund Investment Due Diligence Playbook

Due diligence is required of any responsible investor seeking to share in the gains (or losses) of the hedge fund of their choosing. This playbook is comprised of basic questions you'll need to be answered before investing in a fund.


Download Template
Start Due Diligence With DealRoom
Start Integration With DealRoom


Hedge Fund Investment Due Diligence Playbook

Due diligence is required of any responsible investor seeking to share in the gains (or losses) of the hedge fund of their choosing. This playbook is comprised of basic questions you'll need to be answered before investing in a fund.

Download Template
Start Due Diligence With DealRoom
Start Integration With DealRoom

What are the benefits of using this template?

Excel Export/Import

Export this template to Excel with just one click. Also, Import your Excel spreadsheet easily - turn it into a nice dealroom.net board.

Integrated with Data Room

The tasks tracker is integrated with the virtual data room, so you can start collecting documents right away.

Easy Tracking

Track your projects progress from start to finish, know if a task is stuck or behind schedule.

Eliminate Excel trackers, emails and disconnected tools with DealRoom

What Tasks does the 

Hedge Fund Investment Due Diligence Playbook

 Include

Strategy

  • What is the overall strategy of the investment fund?
  • What are the key objectives of the investment fund?
  • How does the fund plan to meet those objectives, in the short and long term?
  • What are the fund’s leverage limits (with respect to the investment vehicle itself) and how heavily is it currently leveraged?
  • What is the fund’s strategy with respect to asset-level debt?

Structure

  • What level of investor approval is required to make changes to the hedge fund’s strategies?
  • Who is responsible for asset-level decisions? What approvals do they require?
  • Who discovers and sources investment opportunities?
  • How are risk management strategies integrated with the activities of the decision-makers?

Fees

  • What are the investment vehicle formation fees anticipated to be?
  • What are the fund management fees?
  • What services are performed in exchange for fund management fees?

Compliance

  • Is the fund facing any current or reasonably foreseeable criminal or civil proceedings of any kind?
  • Was the fund, or any of its principals, ever subject to a legal, regulatory, or civil judgment or negative ruling or order?
  • Are any of the general or limited partners facing any current or reasonably foreseeable criminal or civil proceedings of any kind?
  • Describe the hedge fund’s approach to regulatory and legal compliance. How is it integrated into the firm’s general operations?

Tax

  • What strategies does the fund use to shield taxable clients from taxation on investment gains?
  • What strategies does the fund use to shield investors using tax-exempt accounts from the Unrelated Business Taxable Income provision, or other provisions that attempt to make otherwise non-taxable investment income taxable?
  • Does the fund make use of any novel or unusual taxation structures or strategies that could reasonably be thought to attract the attention of the tax authority?

Miscellaneous Items

  • What are the risks of the portfolio?
  • What is the fund’s derivative strategy and how much exposure does the fund have?
  • What is the average turnover rate for assets owned by the fund? What is your asset churn rate?

Personnel/Biographical Details

  • Are any of the fund’s decision-makers both: inexperienced, and relatively unsupervised?
  • Do any of the fund’s decision-makers have a significant history of either: disreputable employers, or short periods of employment?

FAQ

What Is Due Diligence?

Due diligence is a critical aspect of any deal that begins very early in the process and can continue right up until closing. During due diligence, the potential buyer asks questions and requests documentation from the seller that helps the buyer understand the target company and its business. These requests are usually general to start and become more specific as the buyer develops a greater understanding of the target. Buyers use the information provided by the seller to evaluate the opportunities and risks associated with the potential transaction. It is important for sellers to stay organized throughout the process. Buyers often submit thorough, detailed request lists that require input from numerous members of the seller’s deal team.

What is a due diligence checklist?

As the name implies, a due diligence request list is a list of questions and requests for information and documentation that a buyer submits to a seller in order to learn about the target company, its business and its operations. The initial diligence request list tends to be broad and typically includes an extensive list of questions covering a wide range of subjects. This allows the buyer to gain a broad understanding of the target company and identify key issues that can be investigated and considered more closely. Because every deal is different, due diligence request lists have to be tailored to meet the needs of the buyer and address the unique circumstances of your transaction.
However, there is a variety of fundamental requests that are relevant in most deals. These are the types of requests that our templates are designed to address.

What Questions Does the Master Due Diligence Questionnaire Include?

As the name implies, a due diligence request list is a list of questions and requests for information and documentation that a buyer submits to a seller in order to learn about the target company, its business and its operations. The initial diligence request list tends to be broad and typically includes an extensive list of questions covering a wide range of subjects. This allows the buyer to gain a broad understanding of the target company and identify key issues that can be investigated and considered more closely. Because every deal is different, due diligence request lists have to be tailored to meet the needs of the buyer and address the unique circumstances of your transaction.
However, there is a variety of fundamental requests that are relevant in most deals. These are the types of requests that our templates are designed to address.

Key considerations when using our m&a due diligence template

Our templates are drafted to provide an inclusive and wide-ranging list of initial due diligence requests. However, the templates, as well as the information contained therein, are not legal advice. They are not complete, and they are not specific to your transaction. The templates are designed to elicit general information from the seller that will provide the buyer with a broad overview of the target and it’s business and operations. You should review any template before using it, and it may need to be modified to ensure that it is suitable and relevant to your circumstances. Information provided by the seller will likely trigger additional questions that focus on specific aspects of the target’s business and issues identified during the due diligence process.

Are the requests in the template comprehensive?

No. Our Due Diligence Checklist is drafted to include typical requests that are relevant in most transactions. However, every deal and every target company is unique. Before utilizing any template, it is important that you review it with the help of your legal and other professional advisors to ensure that the requests are complete and tailored to the specific circumstances of your deal.

How to use the template with Dealroom

  • Start 14-day Free Trial of DealRoom and sign-up
  • Select a Master Due Diligence Template while creating a new room
  • Start assigning, adding to, and completing due diligence requests with needed documents by uploading them into the built-in virtual data room. The Requests tab is automatically populated with the requests from the due diligence template.

Can I change requests in this checklist or add new?

Every M&A process is different. Downloaders are urged to make these checklists their own by changing the providing information to better fit their needs.

Does this questionnaire provide all the necessary integration information?

This checklist was created by and for M&A professionals. It includes a comprehensive starting point for the integration process. However, every deal is different and may require additional requirements and tasks.

How to use this template with DealRoom?

  • Start 14-day Free Trial of DealRoom and sign-up
  • Select an Integration Template while creating a new workspace
  • Start planning, assigning, adding to, and completing integration tasks. The Requests tab is automatically populated with the tasks from the integration template.

Key considerations when using our m&a due diligence template

Our templates are drafted to provide an inclusive and wide-ranging list of initial due diligence requests. However, the templates, as well as the information contained therein, are not legal advice. They are not complete, and they are not specific to your transaction. The templates are designed to elicit general information from the seller that will provide the buyer with a broad overview of the target and it’s business and operations. You should review any template before using it, and it may need to be modified to ensure that it is suitable and relevant to your circumstances. Information provided by the seller will likely trigger additional questions that focus on specific aspects of the target’s business and issues identified during the due diligence process.

Are the requests in the template comprehensive?

No. Our Due Diligence Checklist is drafted to include typical requests that are relevant in most transactions. However, every deal and every target company is unique. Before utilizing any template, it is important that you review it with the help of your legal and other professional advisors to ensure that the requests are complete and tailored to the specific circumstances of your deal.

How to use the template with Dealroom

  • Start 14-day Free Trial of DealRoom and sign-up
  • Select a Master Due Diligence Template while creating a new room
  • Start assigning, adding to, and completing due diligence requests with needed documents by uploading them into the built-in virtual data room. The Requests tab is automatically populated with the requests from the due diligence template.

Hedge Fund Investment Due Diligence Playbook

Due diligence is required of any responsible investor seeking to share in the gains (or losses) of the hedge fund of their choosing. This playbook is comprised of basic questions you'll need to be answered before investing in a fund.

Hedge fund investment can be challenging

Investing in a hedge fund is obviously a significant and consequential decision for anyone. Trying to manage and understand the complexities of a modern investment vehicle is equally significant. Due diligence is required of any responsible investor seeking to share in the gains (or losses) of the hedge fund of their choosing.

Below you’ll find a checklist of the basic questions you’ll need to have answered before entrusting a fund with your money. And our due diligence solution will transform your diligence process into one efficient workflow.

Start trial with this playbook

Prepare for your due diligence

DealRoom’s due diligence template is designed to help teams have an efficient diligence process from the beginning. By providing your team with a pre-made initial diligence checklist, you can get a jump start on fulfilling diligence requests.

This template offers you a comprehensive examination of different types of information on preliminary stages of investing in a hedge fund. And when you use a diligence tracker inside DealRoom, everything will be in one centralized space. If you get any answers that are not complete or not to your liking you may wish to follow up and ask further questions and them in DealRoom.

Project Tristan
Requests
Documents
Groups
Analytics
Overview
Progress
Timeline
Filter
All Requests
Export
  • What is the overall strategy of the investment fund?
  • What are the key objectives of the investment fund?
  • How does the fund plan to meet those objectives, in the short and long term?
  • What are the fund’s leverage limits (with respect to the investment vehicle itself) and how heavily is it currently leveraged?
  • What is the fund’s strategy with respect to asset-level debt?
  • What level of investor approval is required to make changes to the hedge fund’s strategies?
  • Who is responsible for asset-level decisions? What approvals do they require?
  • Who discovers and sources investment opportunities?
  • How are risk management strategies integrated with the activities of the decision-makers?
  • What are the investment vehicle formation fees anticipated to be?
  • What are the fund management fees?
  • What services are performed in exchange for fund management fees?
  • Is the fund facing any current or reasonably foreseeable criminal or civil proceedings of any kind?
  • Was the fund, or any of its principals, ever subject to a legal, regulatory, or civil judgment or negative ruling or order?
  • Are any of the general or limited partners facing any current or reasonably foreseeable criminal or civil proceedings of any kind?
  • Describe the hedge fund’s approach to regulatory and legal compliance. How is it integrated into the firm’s general operations?
  • What strategies does the fund use to shield taxable clients from taxation on investment gains?
  • What strategies does the fund use to shield investors using tax-exempt accounts from the Unrelated Business Taxable Income provision, or other provisions that attempt to make otherwise non-taxable investment income taxable?
  • Does the fund make use of any novel or unusual taxation structures or strategies that could reasonably be thought to attract the attention of the tax authority?
  • What are the risks of the portfolio?
  • What is the fund’s derivative strategy and how much exposure does the fund have?
  • What is the average turnover rate for assets owned by the fund? What is your asset churn rate?
  • Are any of the fund’s decision-makers both: inexperienced, and relatively unsupervised?
  • Do any of the fund’s decision-makers have a significant history of either: disreputable employers, or short periods of employment?

Strategy

  • What is the overall strategy of the investment fund?
  • What are the key objectives of the investment fund?
  • How does the fund plan to meet those objectives, in the short and long term?
  • What are the fund’s leverage limits (with respect to the investment vehicle itself) and how heavily is it currently leveraged?
  • What is the fund’s strategy with respect to asset-level debt?

Structure

  • What level of investor approval is required to make changes to the hedge fund’s strategies?
  • Who is responsible for asset-level decisions? What approvals do they require?
  • Who discovers and sources investment opportunities?
  • How are risk management strategies integrated with the activities of the decision-makers?

Fees

  • What are the investment vehicle formation fees anticipated to be?
  • What are the fund management fees?
  • What services are performed in exchange for fund management fees?

Compliance

  • Is the fund facing any current or reasonably foreseeable criminal or civil proceedings of any kind?
  • Was the fund, or any of its principals, ever subject to a legal, regulatory, or civil judgment or negative ruling or order?
  • Are any of the general or limited partners facing any current or reasonably foreseeable criminal or civil proceedings of any kind?
  • Describe the hedge fund’s approach to regulatory and legal compliance. How is it integrated into the firm’s general operations?

Tax

  • What strategies does the fund use to shield taxable clients from taxation on investment gains?
  • What strategies does the fund use to shield investors using tax-exempt accounts from the Unrelated Business Taxable Income provision, or other provisions that attempt to make otherwise non-taxable investment income taxable?
  • Does the fund make use of any novel or unusual taxation structures or strategies that could reasonably be thought to attract the attention of the tax authority?

Miscellaneous Items

  • What are the risks of the portfolio?
  • What is the fund’s derivative strategy and how much exposure does the fund have?
  • What is the average turnover rate for assets owned by the fund? What is your asset churn rate?

Personnel/Biographical Details

  • Are any of the fund’s decision-makers both: inexperienced, and relatively unsupervised?
  • Do any of the fund’s decision-makers have a significant history of either: disreputable employers, or short periods of employment?

How DealRoom can help you execute due diligence

By using our master due diligence template, alongside DealRoom’s M&A lifecycle management software, you can create a smooth diligence process.

How DealRoom can help you execute integration

By using our integration template, alongside DealRoom's M&A lifecycle management software, you can create a smooth integration process

With this solution you’ll receive:

Professional diligence template

With requests that are specific to your transaction type. Whether you conduct sell-side or buy-side transactions, our platform allows you to add new requests as they pop up, track progress, collaborate and more.

A built-in data room

Allowing you to link corresponding documents to the diligence requests and keep all the information safe. Organize and manage your files and documents with easy drag & drop upload, 4-levels permissions, a built-in viewer, and smart notifications.

Project management capabilities

That enable your team to work together and set priorities during the diligence process. You can also invite other parties and client into the platform, set permissions, access and answer new coming requests.

Collaboration tools

To eliminate long email threads. Team members can add comments and specifically tag other users on requests to ask questions or give awareness.

More Templates

IT Due Diligence Checklist

M&A NDA Template

Merger Integration Timeline Template

Try DealRoom templates

Signup for DealRoom

Download Template

*All fields are required