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Your Guide to Due Diligence Software

Due diligence software is one of the solutions that helps investors, fund managers and allocators to overcome the challenge of maximising investment opportunities and returns while minimising risk on deals.

The due diligence process is resource-hungry, demanding a methodical approach to both the collection and analysis of substantial amounts of data. Digital automation helps make this intensive process easier by giving you the tools that you need to deliver the results you and your customers are looking for.

There are no shortcuts with due diligence. It is a vital risk management activity for today's investors in hedge funds, equities and similar financial vehicles. The levels of risk and regulatory requirements in today's markets demand that businesses conduct due diligence that's thorough, transparent and timely.

At the same time there's pressure to deliver these processes as cost-effectively as possible. An effective due diligence software solution harnesses the capabilities of information technology in a way that meets the needs of decision-makers, regulators and investors.

The challenge of delivering effective due diligence

Performing a comprehensive appraisal of hedge funds and other investment opportunities demands the collection of large quantities of data from various sources. This means effectively working through a checklist of document types, including:

  • Share returns
  • Monthly estimates
  • Exposure weights
  • Questionnaires
  • Reporting

The result of this data collection exercise is a stack of information and documents that must be processed and filed, to ensure that all the implications are identified and understood, and that each document remains accessible to everyone who may need to review it.

At the same time, every document must be kept secure, with access available only to those with the relevant authority and permissions. The entire process should be transparent, auditable and in line with regulatory requirements.

Achieving all this can be resource intensive. A significant amount of the due diligence team's time is typically given up to identifying, pursuing and verifying the required information. This can involve a considerable number of emails, phone calls and other forms of communication with those holding the documents or information.

Once received, the team must ensure documents are filed correctly, for security purposes and in a way that allows fast access should they need to be retrieved.

All this requires staff to put in hours of time and to have the level of knowledge and experience to know what information they are looking for and how to find it. Fortunately, well designed due diligence software now automates many of these processes.

Effective due diligence demands a strategy

Conducting due diligence is more than just carrying out a box ticking exercise.

It’s a process that supports high quality decision making and risk management, delivered at the speed required in today’s busy and complex market environment. At the same time, it ensures compliance with relevant regulations and creates a trail of activity that’s fully auditable.

Satisfying all these objectives in a timely, cost-effective manner demands the use of robust, repeatable processes and procedures. Automation of these, as far as possible, not only makes them faster and more efficient, it also helps ensure compliance with policies and rules that are coded into the software.

Setting this up requires thorough planning and implementation of a strategy. Areas this strategy should cover include:

  • Consistent approach to collection of qualitative and quantitative data.
  • Communication channels, protocols and formats for information exchange.
  • Virtual data room for document storage.
  • Clearly defined stages and steps in the due diligence process.
  • Clarity around responsibilities.
  • Clear, consistent reporting and dashboards.

Due diligence software is a tool that supports implementation and operation of your strategy. Once you’ve defined your workflows and checkpoints, the software helps keep your processes consistent. While intervention from your staff is necessary at various points, the software helps keep processes moving and, where possible, allows for the automation of decision making.

The quality of your processes, as supported by your chosen due diligence software, helps keep your business more efficient, assists with risk management and gives you more confidence in the data you’re using for key decision making.

AlternativeSoft is used by some of the world's largest pension funds, family offices, funds of funds, private banks, endowments, foundations and wealth managers. With its easy-to-use functionality for modelling, peer group analysis, watchlist creation and due diligence, the software allows investors to decompose returns, manage risk and make well-informed investment decisions.

Learn more about what AlternativeSoft can do for you. Get in touch with us today.

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