SD-03.4 — Fund Investment Due Diligence

Business Domain: BD-03 Manager & Fund Investment (Front office) · Applies: PRIV

Purpose

Assesses the investment thesis, terms and return drivers of a fund commitment. Where SD-03.2 forms the view that a manager has skill, Fund Investment Due Diligence is the deep, fund-specific work behind committing to a particular closed-end fund: what the fund will invest in, how it expects to make money, what the LPA will cost the institution, and whether the track record supports the case. It is the investment counterpart of the operational due diligence SD-03.3 runs in parallel — the two diligence streams meet at the selection recommendation.

Service Operations

• Assess the investment thesis — the fund’s strategy, the market opportunity and the credibility of the return thesis.
• Analyse the return drivers — the sources of past return and value creation, and whether they are repeatable.
• Review the fund terms — the LPA economics: management fee, carried interest, hurdle rate, GP commitment, the waterfall, key-person and governance terms.
• Analyse the track record — the realised and unrealised performance: DPI, TVPI, RVPI, IRR, MOIC and public-market-equivalent comparison, by vintage.
• Conduct reference calls — with the fund’s other LPs and with management of its portfolio companies.
• Produce the investment due-diligence report — the recommendation and the conditions, paired with the SD-03.3 ODD opinion.

Inputs and outputs

• Inputs: the fund’s offering materials and LPA; the ILPA DDQ responses; the GP’s track record; the manager research from SD-03.2.
• Outputs: the investment due-diligence report — consumed by SD-03.2 (the selection recommendation) and SD-03.5 (the commitment), and ratified by the investment committee.

Entities

• Consumes: Fund & Vehicle (PM-01), Fund Terms (PM-10), Legal Entity (E-01, the GP); the SD-03.2 manager research.
• Owns: none — the investment due-diligence report is an analytical artefact.

Standards

• The ILPA Due Diligence Questionnaire 2.0 — the industry-standard private-markets diligence schema. The performance metrics (DPI, TVPI, IRR, MOIC, PME) are computed by BD-09 Performance & Analytics and consumed here.

Open extensions

• A diligence / DDQ record entity.
• The boundary with SD-03.2 — public-markets external-manager investment diligence is carried within SD-03.2; SD-03.4 is the deeper, fund-commitment-specific diligence.