Operational Due Diligence by Jason A. ScharfmanHow to diagnose and monitor key hedge fund operational risksWith the various scandals taking place with hedge funds, nowmore than ever, both financial and operational risks must beexamined. Revealing how to effectively detect and evaluateoften-overlooked operational risk factors in hedge funds, such asmulti-jurisdictional regulatory coordination, organizationalnesting, and vaporware, Hedge Fund Operational Due Diligenceincludes real-world examples drawn from the authors experiencesdealing with the operational risks of a global platform of over 80hedge funds, funds
of hedge funds, private equity, and real estate managers.
Understanding operational due diligence - a case study. Chapter 4 - Operational infrastructure.
Operational due diligence
Operational due diligence is an inseparable part of any due diligence DD process. It is very important to understand the operations of the target company to see how they fit into the structure of the buyer's enterprise. Operational due diligence is the process by which a potential buyer reviews the operational aspects of a target company during mergers and acquisitions. The approach for operational due diligence varies by industry. An operational due diligence review is often performed by a third party, such as a professional services firm.
For Corporates that are acquiring, value is typically realised in the form of synergies, or when they are disposing, from capturing and communicating effective value enhancement propositions for any entities being sold. For Private Equity clients, operational efficiencies and cost reduction continue to be a greater area of focus, both in the area of pre-deal due diligence and in their approach to managing the organisations under their ownership. We bring together both experienced line managers and operational due diligence specialists to provide deep and focussed insight in both pre-deal diligence and in identifying opportunities for post deal value enhancement. Jason Caulfield has previously published on the role of Operating Partners within Private Equity and delivering value from their portfolio companies. Please download this here. He focuses on operational due diligence, performance improvement, synergy and separation review work for Corporate, Private Equity and banking c
In alternative investments , operational due diligence ODD , is an investigation due diligence into operational factors of alternative investment entities such as a hedge fund , private equity fund , or infrastructure fund. Operational risks are the risks arising from execution of the business functions of any entity, for example an alternative investment fund, and these are distinct from its investment functions. In fact, historically, it can be said that it has been more common for an IDD to be performed than for an ODD to be performed, despite strong academic arguments and empirical evidence that overall risk i. The historical position is somewhat odd given the prevalence of operational risk failures in, for example, hedge fund scandals and closures over the years. A book by Jason Scharfman of Corgentum Consulting  suggests that operational risks are inherent contributing factors to all hedge fund failures. The clear implication of this statement is that in the absence of detailed and robust pre-investment and on-going ODD, investors simply missed the operational risks inherent in the structure. The purpose of an ODD exercise is to gather, analyse and to a degree verify information relating to operational risks to:.