Due Diligence and Risk Assessment of an Alternative Investment Fund

Due Diligence and Risk Assessment of an Alternative Investment Fund

Acknowledgments

Contents

Charts

Tables

Abbreviations

1. Agenda

1.1 Introduction

1.2 Purpose and structure

1.3 Risk

1.4 Alternative Investment Fund

1.5 Due Diligence

2. Investment Philosophy and Due Diligence

2.1 Investment policy, strategy and mandate

2.2 Management team qualities

2.3 Performance screening of an Alternative Investment Fund

2.4 Chapter sum up on the example of JWM Partners LLC

3. Relative Value and Market Neutral Strategy Risk

3.1 Relative Value and Market Neutral Strategy Risk

3.1.1 Fixed Income Arbitrage

3.1.2 Convertible Arbitrage

3.1.3 Equity Market Neutral

3.2 Strategy Risk Level Aggregation

4. Event Driven Strategy Risk

4.1 Event Driven Strategy Risk

4.1.1 Risk Arbitrage

4.1.2 Distressed Securities

4.2 Strategy Risk Level Aggregation

5. Opportunistic Strategy Risk

5.1 Opportunistic Strategy Risk

5.1.1 Global Macro

5.1.2 Emerging Markets

5.1.3 Long/Short Equity

5.2 Strategy Risk Level Aggregation

6. Internal and External Risk Factors

6.1 Internal Risks

6.1.1 Hubris

6.1.2 The attitude, the structure and the business cycle risk

6.1.3 Operational risk

6.1.4 Fund’s size, funding and leverage

6.1.5 Interpersonal relationship, transparency and reporting

6.2 Internal Risk Level Aggregation

6.3 External Risks

6.3.1 Industry shape, structure and evolution

6.3.2 Industry rivalry

6.3.3 Trends and new strategies

6.3.4 Macroeconomic scenarios

6.3.5 Investment process and research

6.4 External Risk Level Aggregation

7. Due Diligence framework, conclusive reflexion andclosing remarks

7.1 Framework for assessing the fund’s risk profile

7.2 Case LTCM

7.3 Conclusive reflexion

7.4 Closing remarks

Bibliography

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