Due diligence is an important source of alpha in a well designed hedge fund portfolio strategy. It is generally understood that the high returns possible in investing in hedge funds are somewhat offset by the relative lack of transparency on operational issues. The performance of a diversified...

Due diligence is an important source of alpha in a well designed hedge fund portfoliostrategy. It is generally understood that the high returns possible in investing in hedgefunds are somewhat offset by the relative lack of transparency on operational issues. Theperformance of a diversified...

Due to imperfect transparency and costly auditing, trust is an essentialcomponent of financial intermediation. In this paper we study acomprehensive sample of due diligence reports from a major hedge funddue diligence firm. A routine feature of due diligence is an assessmentof integrity. We find...

This paper studies operational risk in the hedge fund industry using a sample of 444 due diligence (DD) reports. Many funds suffer from operational problems, ranging from limited disclosure on past legal or regulatory offenses and the failure to use a major auditing firm to the frequent use of...

This paper studies operational risk in the hedge fund industry using a sample of 444 due diligence (DD) reports. Many funds suffer from operational problems, ranging from limited disclosure on past legal or regulatory offenses and the failure to use a major auditing firm to the frequent use of...

Due to imperfect transparency and costly auditing, trust is an essential component of financial intermediation. In this paper we study a sample of 444 due diligence (DD) reports from a major hedge fund DD firm. A routine feature of due diligence is an assessment of integrity. We find that...