Operational due diligence (ODD) is an important part of assessing a fund manager’s suitability for managing a fund allocator’s investments. Before the allocator can confidently allocate funds to the manager, they need to conduct thorough and comprehensive operational due diligence, in line with their operational due diligence checklist. This is to ensure that any operational risks the fund manager faces bear no significant impact on the potential investment and its performance.
This process does, however, come with a number of challenges that allocators need to account for and mitigate where possible. To try to do this and streamline their operational due diligence process, many fund allocators are turning to technology. Below, we explore the advantages of using technology for operational due diligence, how it can solve the common challenges that come with conducting operational due diligence, and how it can ultimately contribute to a more comprehensive operational due diligence checklist.
While straightforward in principle, operational due diligence looks at a number of factors and moving parts, which should all ideally be stipulated in an allocator’s operational due diligence checklist ahead of commencing the assessment process. These various factors can make the process particularly challenging for a number of reasons, and often, the operational due diligence checklist in use isn’t necessarily exhaustive.
The typical ODD checklist includes a number of different document types that need to be accessed, processed and filed in line with regulatory requirements. Collecting and working through these documents is time and resource intensive and relies on a standardised and consistent approach to run smoothly. The documents required may also vary from one fund manager to the next, so the checklist needs to account for all possible documents needed.
However, despite most allocators’ best efforts to have a standardised and comprehensive approach to their operational due diligence checklist and process, they still struggle with limited access to the information they need. Additionally, delays in obtaining this information, which are common, can have a knock-on effect on the rest of the process, especially when there’s a limited timeframe it needs to be completed in.
With all of these challenges in mind, an allocator may realise that their processes and operational due diligence checklist are lacking. This makes standardising the procedure for future ODD activities difficult, as the same limitations initially experienced will just keep cropping up time and time again.
Advancements in technology have made the operational due diligence process easier for fund allocators, as intuitive data and automation solutions offer the capabilities needed to optimise the ODD process while offering support for every step of the process within a single, all-in-one platform. This, in turn, enables allocators to make more informed decisions, both in terms of their investments as well as the scope of their operational due diligence checklists and procedures.
Here are some of the ways technology enhances ODD for allocators:
Leveraging the above-mentioned capabilities of a modern technology solution when conducting operational due diligence can provide a number of benefits for both fund allocators and fund managers alike, including:
With the support of technology and the benefits that result from a streamlined operational due diligence process, allocators can spend more time using the insights they’ve gained from the process to improve their operational due diligence checklist for future ODD checks.
Operational due diligence technology solutions, such as those offered by AlternativeSoft, can help you achieve a more methodical, streamlined and effective due diligence process to support your investment portfolio goals overall.
With our solutions, you can define your ODD workflows and checkpoints, then the system helps keep your process consistent while allowing for automated decision making where possible, minimising the need for human intervention. This means a more timeous, high quality ODD process, and more accurate insights to help improve your operational due diligence checklist.
Used by some of the world’s largest pension funds, family offices, funds of funds, private banks, endowments, foundations and wealth managers, our easy-to-use, all-in-one SaaS ecosystem:
With AlternativeSoft, fund managers can be more confident during their ODD review, and fund allocators can enhance their ODD processes and checklists for more informed investment decisions.
Operational due diligence is a demanding but necessary process for managing risk in today’s investment environment. While traditionally time-consuming and resource-intensive for fund allocators and managers, technology solutions now offer the capabilities to make ODD easier for everyone involved.
By leveraging an effective solution, allocators can enjoy an optimised and holistic operational due diligence process, which can contribute to the creation of a more comprehensive ODD checklist that they can depend on, both now and in the future.
To learn more about AlternativeSoft’s ODD technology solutions, download our Due Diligence Anaytics brochure, or read our ebook of expert tips on how to conduct your investment due diligence correctly. Alternatively, you can contact our friendly team to learn more about how we can help streamline your due diligence process.