Hedge Fund Vendor Diligence

The vendor diligence package is used by the fund manager when an investor is conducting due diligence on the fund, and possibly visiting the fund manager at their place of business. It will contain the copies of the formations for all the entities — file stamped by the appropriate state agencies, copies of their tax letters indicating their tax ID numbers, copies of LLC operating agreements showing that the persons running the fund are managers of the fund and what their powers are. There will also be policies and procedures for the fund manager, they include disaster recovery and data storage policy, email policies, codes of ethics, anti money laundering policies, and privacy policies. There is typically a Q&A section, it’s the questions that we believe a typical investor would ask of the fund manager in the course of doing their investigation, for example who is the backup trader? What is the fund structure? what is the risk management that will be employed by the fund manager? Who are the auditors for the fund? How frequently are the audits performed? These questions and answers are provided to the potential investor. Provided also will be a copy of the engagement letter with the auditor, engagement letters with relevant service providers. This will allow the investor to contact the service provider, the auditor, counsel to confirm that there is a relationship between that service provider and the fund’s manager.