More about Hedge Funds and Due Diligence

What is a Hedge Fund?

A hedge fund is an alternative investment vehicle typically offered to a limited range of professional investors that are both knowledgeable about investing and have significant wealth. Hedge funds are offered through an investment manager, who is responsible for overseeing trading and operation of the fund.

Hedge funds offer a broader variety of investing options and the potential for higher returns – than more traditional investment options, like stocks and bonds, reacting differently to market or economic events.

The term “hedge fund” describes the investment vehicle, like a limited liability company or a partnership, and not an investment strategy directly. Hedge funds use advanced investment strategies in both domestic and international markets.

 

What is operational due diligence?

Alternative investments like hedge funds pose two risks to the investor: investment risk and operational risk. Investment risk is the risk of the investment strategy chosen and or the individual investments selected. Operational risk, by contrast, is external to the investment decision-making process, for example - weaknesses in the business infrastructure of the fund or the manager, or deficiencies in accounting controls.

Operational due diligence investigates these and many other factors. Operational due diligence companies like Castle Hall analyze this kind of risk, assisting clients in making better investment decisions.