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Importance of operational due diligence

Posted Feb 7, 2015 by benanderson
Operational due diligence has a detrimental importance when it comes to investments, such as hedge funds.

FOR IMMEDIATE RELEASE (Press Release) Feb 7, 2015 -- Operational due diligence has a detrimental importance when it comes to investments, such as hedge funds. As a matter of fact, investors need to check on a regular basis operational risks, just to be sure they are protected, and what is their current situation. When it comes to alternative investments, investigations must be conducted taking into account operational factors. For example, private firms that manage investments for clients and family offices conduct research and quant analytics to make sure services are tailored to their needs.

Investors and private firms make great use of operational due diligence to review the client’s operations and see whether the needs and expectations are achievable. In the same time, any existing risks will be pointed out, to let clients know exactly what their situation is and what to expect. Since the research is so important, the same it is when it comes to choosing a third-party that conducts it. In most cases, a private firm is chosen to offer advice and to manage investments on behalf of the companies or individuals. Both quant analyses and qualitative analyses are conducted.

Investors must understand the purpose of operational due diligence and quant analysis and why it important for both to be considered prior to making investments. During the process, information is gathered to point out operational risks. It allows investors interested in alternative investment options to see if it is more appropriate to keep on investing or to divest. Some of the aspects that will be referred in the research include valuation procedures, how will the investor recover in case of a disaster, liquidity, legal matters, doing background checks and more. It depends in the end of the investment provider chosen and the practices and methods each uses.

Speaking of which, investments can be complex and unexpected, a reason to look into private firms and see how each operates and what services are provided. It is not enough just to leave someone making investments on your behalf, as that firm has to be highly specialised, experienced and to have well established strategies and offer operational monitoring. Operational due diligence and quant should be included within the services offered, for more realistic research and results. No one wants to waste time and money with the wrong providers.

Investors can perform analysis themselves, but perhaps they don’t have the necessary methods or don’t know how to approach them in the first place. By involving a team of specialists, with experience and depth knowledge, the risks can be indentified and recommendations are easier to obtain. It is different when someone reviews investments from the outside and knows exactly on what to focus their attention. At the end, a report can be completed that will include all details and assessments of clients and funds. This will serve as a powerful tool that will help both investors and private firms at taking decisions.

Resource Box: This private firm focuses on operational due diligence as a key part of any investment. They also focus on quant to find new investment methodologies.
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Issued By : benanderson
Country : Canada
Categories : Business
Last Updated : Feb 7, 2015

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