Finance professor publishes survey on due diligence practices among investors

March 6, 2008 - Interim Dean of the School of Business Matthew O'Connor collaborated with the Greenwich Roundtable in the first biannual survey of due diligence practices among private and institutional investors.

Findings from the survey were released March 6. The group plans to repeat the survey every six months in order to track and monitor changes in the ways of sophisticated investors.

"Alternative investments have been growing in popularity among asset allocators, and due diligence practices are increasingly front of mind as they consider where to invest," said O'Connor. "With an empirical understanding of current due diligence practices, we will be better equipped to track and analyze changes to these practices in the future."

The survey's questions fell into one of the following due diligence categories: processes, background checks, investment decisions, fund managers, fund management and transparency. A majority of the respondents represent the leading funds of hedge funds and family offices.

Key findings of the survey include:

  • Almost half of respondents were more concerned with asset valuation and liquidity now than they were 12 months ago.
  • Over 20 percent of respondents typically devote more than six months to due diligence.
  • Over 80 percent of respondents have decided not to invest with a manager because of discoveries in background checks.
"This survey reflects actual investor behavior," said Steve McMenamin, executive director of the Greenwich Roundtable. "It offers some fresh evidence that investors performing due diligence on alternative managers are the clearing mechanism for the market place."

The Greenwich Roundtable is a not-for-profit research and educational organization located in Greenwich, Conn., for investors who allocate capital to alternative investments.

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