2018 was quite the rollercoaster for global markets, as fear and uncertainty ruled various economies throughout the year. This has resulted in more investment demand in general safe haven vehicles, such as private equity, alternative yield, and private funds. These practices, although safer, are more structurally complex in nature and require far more detail put into post due diligence in order to guarantee safe returns.
All investors appear to have what are called behavioral biases, which have been known to result in a free to roam approach when regarding ongoing due diligence to assets. These strategies tend to hold securities which at times can be difficult to value and may contain asset existence issues, which hold quite a number of financial risk.
In recent years, institutions maintaining client assets or other funds have seen increasing recognition that they are responsible for reasonable post due diligence across all external relationships, irrespective of the asset class.
In respect to that, it’s recommended that individual investors themselves should take into consideration and curate a clear due diligence plan. These plans would contain consistent frameworks and policies on how to monitor assets and funds whilst understanding how to escalate concerns which come forth further down the road.
Ongoing, post due diligence requires a lot of work to contact managers and ask continuous questions, which can be tedious and repetitive at times. However, without these acts being carried out in this current economic climate, your assets could quickly become liabilities.
Written by Corey Fry,
Head Currency Analyst