The questions to ask before allocating to a hedge fund, and how to keep the answers together. AlternativeSoft supports hedge fund due diligence for 150+ institutions.
A live walkthrough tailored to your asset classes, followed by a 14 day free trial.
A hedge fund due diligence checklist should cover the strategy and its edge, the track record, the team, risk management and liquidity, fund terms and fees, and operations. Each area needs specific questions and supporting evidence. AlternativeSoft brings the research and the answers together so an allocator can compare managers consistently.
By AlternativeSoft · Last updated:
Use the same questions for every manager.
What does the manager do, why should it work, and how much capacity does it have? Ask for examples of winning and losing trades.
Check the length and consistency of returns, how they compare with peers, and how the fund behaved in falling markets.
Review the experience, tenure and incentives of the team, and what happens if a key person leaves.
Ask how risk is measured and limited, what leverage is used and how quickly positions can be sold.
Read the fee structure, lock-ups, gates, side letters and redemption terms before you commit.
Confirm the service providers, valuation process and controls. See the operational due diligence checklist for detail.
Due diligence is hard to compare when every manager answers in a different format. AlternativeSoft pairs standard questions with return-based analysis, so the numbers and the answers can be read together.
Use return and risk statistics to decide which managers deserve a full review.
Send standard questions and request the supporting documents.
Compare what the manager says with the data, and with the views of references and service providers.
Record the decision, then track the manager after investment.
| Area | Spreadsheets and separate tools | AlternativeSoft |
|---|---|---|
| Track record | Reviewed in a spreadsheet | Tested against peers with 4,000+ statistics |
| Questions | Different for each manager | A standard set for every manager |
| Style check | Taken from the manager’s own description | Tested against factor exposures |
| Documents | Scattered across emails | Kept with the manager record |
| Decision record | Rarely documented | Decision and reasons stored |
It is the process of assessing a hedge fund before and after investing. It covers the investment strategy, the track record, the team, the risks, the terms and the operations.
The time depends on the manager and the allocator. A first screen can be quick, while a full review including operational due diligence takes longer.
Examples include returns that look too smooth, high dependence on one person, weak or unusual service providers, unclear valuation of difficult assets and reluctance to share documents.
Yes. It supports return-based analysis and keeps research and notes with each manager. Operational due diligence is available through our cloud offering.
Yes. A 14 day free trial is available after a demo, with onboarding support from our team.
Join the 150+ institutions that use AlternativeSoft to select and monitor their funds. A 14 day free trial follows your demo.