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After attempting to reinvent asset allocation in the 2013 Portfolio Whiteboard Project, Uncorrelated quickly learned that next generation institutional investors faced a much bigger challenge. In the related white paper, we wrote: “The very framework of investing, from governance to execution, needs to be re-considered.” This important insight became the starting point for Uncorrelated to collaborate with investors, asset managers, and experts to reinvent other aspects of the investment process. When Jason Klein, the Chief Investment Officer of Memorial Sloan Kettering Cancer Center, urged us to tackle due diligence, we made it our mission.

With Klein as our thought partner (see From our Investor Thought Partner, p. 2), we began with the premise that everybody in the investment industry believes they do due diligence well. But, he asked, “Do we do due diligence as well as we think we do? What can we do differently, or better? What aspects do we need to rethink? What new tactics and tools can help?” Armed with these questions, we researched further.

Conversations with institutional investors convinced us that due diligence was indeed ready for a do-over. For one thing, in reaction to the Madoff fraud during the 2008 financial crisis, investors and consultants

had created a stultified and onerous due diligence process. Bogged down by increasingly bloated questionnaires, awash in documentation, fixated on operational due diligence, and derided as a “box-checking exercise”, this approach persists despite little evidence that it produces better results.

We learned about new tools and important issues investors wanted or needed to hear about, particularly in three key areas – qualitative thinking, data and analytics, and technology. Asset managers, typically the subject of due diligence, wanted to know how they could be more responsive to investors and improve their chances of success. In short, all sides of the industry wanted to change a process that had become more complicated and not necessarily more effective.

With Northern Trust Asset Management serving as our lead asset management advisor, we organized DoDiligence™ – Reinventing the Due Diligence Process, an Uncorrelated Whiteboard Project, to bring together investors, experts, and asset managers to reexamine due diligence from multiple perspectives, incorporate new ideas and information, and determine improvements. We called it DoDiligence™ because due diligence is what investors do. It’s how they spend their time and is essential to making reasoned, thorough, and sound investment decisions.

DoDiligence™

Reinventing the Due Diligence Process

Uncorrelated organizes industry-wide collaborative Whiteboard initiatives to rethink investment processes. In DoDiligence™ – Reinventing the Due Diligence Process, institutional investors, asset managers, and experts tackled a particularly onerous challenge and generated guidelines and recommendations for any institution seeking to redo the due diligence process.

Uncorrelated, LLC

It became abundantly clear that the due diligence process was ready for reinvention, because on August 4, 2015, on a hot New York City summer day, we gathered a capacity crowd, an outstanding group of investors from endowments, foundations, and pensions; distinguished expert speakers; top asset management firms; and leading consultants. In this sold out, one-day workshop, participants came together for education, conversation, and collaboration, aiming to achieve the ambitious objective to reinvent the entire due diligence process from discovery to diligence to decision.

Following an opening State of Due Diligence discussion with expert speakers and advisory board members (See article, p. 8), three groups collaborated with each other in three breakout sessions, with the key topics serving as the focal points for wide-ranging discussions. After hearing from our keynote speaker, participants generated recommendations for reinventing the due diligence process. Individual group representatives then presented their conclusions to all participants.

To determine the final results for this paper, we compared and contrasted the outcomes from each group. Similarities among the groups form the core findings, a general framework for reinventing due diligence. We then elaborate on key concepts and list specific recommendations for incorporating qualitative thinking, data and analytics, and technology into the process. While we intended to examine the entire due diligence process, the results primarily emphasize manager selection techniques.

In this white paper, we provide recommendations for reinventing the process from investment professionals working on the front lines of top institutions and present you with a view into the current state of due diligence. We see this paper as a starting point for important discussions that will unfold over time. Please join the conversation and post your comments online at theuncorrelated.wordpress.com.

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From our Investor Thought Partner How does reinventing investment due diligence help cure cancer?

As Senior Vice President and Chief Investment Officer, my role is to oversee the asset allocation, manager selection, and risk management efforts on approximately $4.5 billion in long-term global investment assets for Memorial Sloan Kettering Cancer Center (MSKCC). Though not on the front lines, my team’s investment results generate financial resources to support our mission to cure cancer. Our cause constantly inspires us to make good investment decisions.

Over coffee one rainy afternoon, Cathleen Rittereiser from Uncorrelated asked what we were doing. I got to thinking – most of my time is absorbed in meeting and evaluating various types of asset managers. Whether we’re flying to San Francisco or walking across Midtown Manhattan, we’re doing due diligence. What could I learn from how other investors do due diligence that would benefit MSKCC?

An Uncorrelated Whiteboard project seemed like a great way to discover and share more efficient ways to conduct and improve the due diligence process. Wanting to hear about new tools/techniques and to find ways to save time/resources, I agreed to serve as the investor thought partner for the initiative – and even created the title “DoDiligence™” to remind us that due diligence is an action It is what we do.

At MSKCC our mission statement says, “The close collaboration between our physicians and scientists is one of our unique strengths, enabling us to provide patients with the best care available as we work to discover more-effective strategies to prevent, control, and ultimately cure cancer in the future.”

We may not have been curing cancer by participating in DoDiligence™, but by creating close collaboration among investors, experts, and asset managers, and publishing our results in this paper, we are one step closer to improving the due diligence process and achieving our mission.

Jason Klein Senior Vice President and Chief Investment OfficerMemorial Sloan Kettering Cancer Center

A day of conversation and collaboration

Investors seek improvements to their existing due diligence process and offer recommendations that set the stage for reinventing due diligence. They desire a more flexible process, while understanding the obligation to meet fiduciary standards, and indicate the need to execute due diligence more proactively and deliberately. In analyzing the results, we identified three underlying themes – Fiduciary, Flexibility, and Forethought – and have described them in relation to participants’ recommendations below.

Fiduciary: Investors recommended maintaining fiduciary standards by factoring governance into their due diligence process and by adhering to industry-standard best practices. The groups acknowledged that often investors do have to “check the boxes” in order to meet fiduciary obligations, but that this is a starting point in the process rather than an end in and of itself.

Flexibility: Participants recommended implementing a due diligence process that emphasized flexibility over rigidity, preferring qualitative methods to analytical techniques. A more flexible approach means adapting to circumstances – market conditions or manager characteristics – and limiting box-checking. While one group characterized their process as “goal-oriented, adaptive,” another group quantified their process, saying it should be “85% qualitative.” Participants did, however, see the need to incorporate consistent data, sophisticated analytics, and innovative technology into their due diligence process. They favored marrying qualitative techniques and

analytical tools to support the process and identified areas where this approach could be applied:

•Cross-training of investment teams with operational efforts •Alignment of interests between managers and their own funds •Intelligent transparency and relationships

Mixing qualitative techniques with technical applications, they believe, will culminate in better investment decisions and serve as the basis for ongoing monitoring and risk management.

Forethought: “Proactive” was the word participants used, but that does not fully describe the theme that surfaced after the workshop. “Forethought” indicates the need to be more deliberate and strategic in the future. Forethought encompasses integration, preparation, and communication. It describes the burgeoning awareness that investors themselves bear responsibility for strategically planning and thoughtfully executing their due diligence process, particularly when selecting managers. This theme emerged in recommendations to incorporate due diligence into the entire investment process, to “stay relevant,” to be more forthcoming with investment managers, and to be respectful of time and resources.

Forethought will be the key to reinventing due diligence, by inspiring investors to create an integrated process combining technology, qualitative thinking, data and analytics.

Three themes form a framework for reinventing due diligence

Executive Summary Three themes underlie the DoDiligence™ recommendations: Fiduciary, Flexibility and Forethought.

•Participants sought flexibility through an “adaptive” due diligence process but recognized the need to adhere to fiduciary standards, even in the form of rigid “box-checking”. At its core, the process must account for the institution’s governance structure and must incorporate the investment team’s beliefs, skills, and capabilities.

•Forethought represents a growing awareness that investors need to insert order and control earlier in the due diligence process. It reflects concerns about optimizing resources, integrating due diligence into the entire investment process, and implementing technology solutions.

•Going forward, addressing cybersecurity risks will become increasingly important, collaborating with industry colleagues using technology will become increasingly prevalent, and outsourcing without active oversight will become increasingly rare.

More evolution than revolution, these results will guide investors as they rethink their due diligence processes.

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Guidelines and recommendations Compiled from our analysis of the day’s discussions, this section includes general guidelines derived from similarities among the groups’ proposals, along with specific suggestions inspired by conversations with expert speakers. While the recommendations involve the entire investment process, the majority relate to manager selection.

Start with governance Investors identified governance as the starting point for an effective due diligence process. As one working group put it, “Know thyself.” Understanding your institution, its governance structure, and the investment committee’s mindset is crucial, because they can “change the course of the process” and affect the types of managers and vehicles you can choose. As one participant noted, “Setting expectations with the committee so that the due diligence process is more efficient would be very useful.” Taking this approach can save scarce time and resources by preventing investors from researching unsuitable managers and can alleviate future problems, especially when approved managers experience a rough patch.

Governance also applies to managing your team and yourself in service to your institution. It means rallying the team around its common purpose, while understanding individual team members’ capabilities, beliefs, and biases. Practicing this self-governance involves focusing on the most important strategies and decision factors and “guarding against irrelevance” by staying current on market conditions and regulatory changes.

Integrate asset allocationMany institutions separate the due diligence process from the asset allocation process, handing due diligence responsibilities to a manager selection team after the allocation is decided. The steps should be more integrated. As one investor said, “Maybe it’s time to jettison the idea that asset allocation creates pie slices, then the ball gets thrown over the wall to the manager selection team to go fill those slices, and never the twain shall meet. Without context, there is no ‘best’ manager. Integrating portfolio construction and manager selection into the due diligence process should lead to better results.”

Employ adaptive manager selection techniques Participants emphasized qualitative techniques and shied away from formulaic processes, because they want to analyze and assess managers based on qualities that may shift depending on circumstances. Some advocated a “management consulting approach” because it analyzes the manager’s organizational characteristics, such as assets under management, alignment of interests, established business or start-up, headcount, etc.

As one participant summarized, “People look for standardization in the due diligence process. There’s comfort in it. In reality, the skill set or data to understand one manager and his/her strategy will require a very different analysis than another’s.” Standardization creates efficiencies in the process, but investors should be wary of the trade-off between standardization and adaptation, and balance accordingly.

Investors should also consider using data and analytics to conduct more upfront initial due diligence on managers, to narrow the funnel at the beginning

of the process and limit the number of managers in a search. One person commented, “The investment and due diligence team should get together BEFORE meeting with a manager to figure out precisely what it wants to know. Instead, most people meet with a manager, get a canned pitch, and figure out how to delve a little deeper.” Future best practice will include an element of Forethought—preparing a short (ideally one-page) Key Questions document to share with managers prior to the meeting for level-setting and prioritizing discussion topics.

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Setting expectations with the committee so that the

due diligence process is more efficient would be very useful.

“”

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Recommendations inspired by discussions with expert speakers Qualitative Thinking •Assess organizational culture: Formal tools exist to assess organizational culture but have not been adapted by investors. Utilize human resource talent management and interviewing techniques, particularly to help understand a manager’s organizational culture and motivations. One investment organization requires potential asset managers to take a web-based personality test. “Sociology and psychology can apply to this industry too,” said one investor, referring to his research into the “Dark Triad,” three socially undesirable personality traits: narcissism, psychopathy, and Machiavellianism.

•Negotiate early: Investors should begin negotiating terms with managers early in the due diligence process. While this tactic helps build trust and understanding, it protects investors from spending time and energy

on an unworkable situation or one that leaves them with little negotiating leverage. Investors should gauge a manager’s responsiveness to information requests to gain insight into future behavior.

•Evolve your policies: Investors should determine if their policies are too restrictive when circumstances change. Some policies overly penalize change and could lead investors to eliminate managers that are evolving organically. One investor described how a consultant almost eliminated an asset manager from a search because of turnover. The manager’s general counsel had retired. Organizations change, people retire; develop your policies accordingly. Similarly, as markets and opportunities evolve, scrutinize your style drift policies. Strategy shift may not always be a bad thing. “Do you really want a smart tech manager to keep buying tech stocks if they think the opportunity isn’t there?”

•Communicate respectfully: Participants stressed the value of open and respectful communication between investors and asset managers. At a minimum, participants recommended that investors respond to managers with feedback, especially when they decide not to move forward with an investment.

Data and Analytics•Trading decisions: Studying managers’ trades, particularly their ability to size positions and outperform during various market conditions, gives insight into their level of skill and ability to deliver alpha.

•Customized research: Expert speakers described tools that allow investors to analyze managers at a more granular level. More robust analytics help investors have the right data and allow them to ask smarter, more focused questions.

•Manager data requests: Investors urged each other not to settle for aggregated data and to use publicly available data in addition to manager-provided data. They advocated for receiving data, especially performance information, in Excel rather than PDF format.

Technology •Operations technology risks: Technology is generally a boon to the investment process but can be a source of risk. Cybersecurity risk should be considered when conducting operational due diligence and reviewing service providers (see Making Cybersecurity Part of Due Diligence, p. 13).

•Standards: Participants believe there will be increasing pressure for technology vendors to create consistent industry standards for presenting reports and information.

Good guys don’t have sufficient imagination to think of all

the ways the bad guys think.“

”

•Customized software: While participants expect to see standardized reporting formats from technology providers, they want customizable software and services.

•Resource saver: Participants seek technology that conserves their time and attention. They want products that only alert them to exceptions.

Finally, an important lesson for hedge fund managers, technology and data providers, and industry associations: Take a cue from private equity. Investors expressed frustration with the lack of transparent and standardized hedge fund data. Said one participant, “The private equity world seems to be ahead of hedge funds in this regard. ILPA’s reporting standards have created a baseline that, as they are adopted broadly, will allow investors to focus on analyzing the data rather than trying to determine where it came from, if it’s complete, and if the methodology is legitimate.” For managers, this tends to be the point where investors are most likely to disengage. For technology and analytics providers, investors may hesitate to purchase systems if they will continue to question the validity and completeness of the underlying data.

NextIn the next section, we take you behind the scenes for a look at The State of Due Diligence, sharing the best thinking of the experts who spoke at the workshop. After reading what they said, would you come to the same conclusions as our participants? How would you apply our experts’ ideas and advice to reinvent your due diligence process? Then, expert speaker Ken Citarella from Guidepost Solutions offers advice on Making Cybersecurity Part of Due Diligence on page 13. Learn more about our participants starting on page 14, followed by our conclusion and next steps.

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The expert speakers presented new information and ideas and recommended solutions to participants’ due diligence challenges. Throughout the day, they participated in breakouts to inform the discussions and enhance the results.

In the opening State of Due Diligence session, the topic experts were joined in discussion by asset management experts Bei Saville from Northern Trust Asset Management and David Wilson from Nuveen Investments. Meeting leaders Nolan Bean and Alan Lenahan from Fund Evaluation Group and Meredith Jones from MJ Alternative Investment Research moderated the discussions and shared their views. Later, keynote speaker Robert P. Rittereiser, CEO of the Global Trademaster Company, shared due diligence lessons gleaned from decades of financial services experience and pivotal roles in major industry transitions. In the following pages, we highlight their remarks and share the best thinking of these experts and practitioners on the state of due diligence and how to reinvent it.

Expert Speakers Ken Akoundi, Ph.D., President, ASPN Solutions“Listen, challenge, and deliver” is the mantra guiding Dr. Ken Akoundi, President of ASPN Solutions, in developing ASPN, a “CIO Dashboard” that empowers institutional investors to more effectively build, execute, and monitor multi-manager portfolios. Initially developed within Protégé Partners, ASPN changes investors’ current due diligence process by offering the ability to aggregate quantitative and qualitative information while remaining responsive to their needs. “The key is to make the system tailor-made but inexpensive.”

Since “no one likes DDQs” – maybe twenty-five out of 300 possible RFP questions are relevant and important – ASPN is introducing new features to customize these questionnaires. ASPN is designed with the vision to foster industry-wide investor collaboration. “A group of smart people together will always make better decisions than any single member.” Such information sharing will support organizations with limited resources, another way to keep the focus on serving investors’ needs.

While numerous due diligence trends emerged from our pre-workshop research, investors asked the most questions, and expressed the keenest interest, regarding three key topics areas: qualitative thinking, data and analytics, and technology. To address these

questions and topics, we identified market-leading experts and invited them to participate as speakers. The key topics, questions, and speakers are listed in the following table.

The State of Due DiligenceExpert Speakers Address Key Topics and Questions

Topic Key Questions Expert SpeakersQualitative Thinking How can you improve the quality of

your due diligence process?

How do you better construct and ask questions to get the information you need?

Tom Brakke, tjb researchJoseph Jaffe, Guidepost Solutions

Data and Analytics What are more robust and systematic methods for collecting data and assessing managers?

How can you improve your analytical techniques to achieve better outcomes?

Westley (West) Chapman, Alpha PipeRick Di Mascio, Inalytics

Technology How can technology improve the process?

What must you know about cybersecurity?

Ken Akoundi, ASPN Solutions Kenneth Citarella, Guidepost Solutions

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Tom Brakke, Principal, tjb researchAs principal of tjb research, Brakke provides consulting services to asset owners, asset managers, and advisory firms, offering qualitative due diligence practice assessments, public workshops, and private training. A CFA Approved Speaker and writer (including the Prudent Fiduciary Digest), Brakke was cited as one of the “Smart People for Investors to Follow” by the Wall Street Journal.

From his experience as an asset manager and consultant, Brakke has found that the due diligence process is about the discovery of variant details and is distinct for each manager. Asking the questions “that the last person didn’t ask, looking for what’s different,” is crucial to the discovery process and should be the framework for identifying a manager’s strengths and weaknesses. Conducting due diligence means asking for the details. Learn about the culture and talk to everyone up and down the chain of

command. “That is where you identify gaps and verify that people are doing what they say they are doing.” Gathering the contextual information will provide a broader picture, but you also need to know what you are looking for and what will add value to your decision. By using a feedback loop, “each qualitative question leads directly to another.”

Westley ChapmanChief Executive Officer and Co-founder, AlphaPipeWestley (West) Chapman is the Co-founder and CEO of AlphaPipe. Before founding the company, Chapman spent 16 years at Goldman Sachs Assest Management (GSAM), where he served as CFO and built the Risk and Operational Due Diligence teams within GSAM for their external manager selection businesses.

After years of experience leading and managing due diligence teams, Chapman felt frustrated with the “document-centric” process. “We email too much information and spend too much time liberating data from documents”; after a while, “investment memos all blend together.” Prevalent information overload “often obscures critical investment insights.” Like him, investors want and need an easier way to distill information from documents into formatted data that allows them to conduct comparative analysis and evaluations. He left Goldman Sachs and started AlphaPipe. AlphaPipe’s core information exchange technology powers a market

network for the investment management industry to support the due diligence and monitoring process. It enables secure and efficient processing of distributed information such as that gathered in asset manager responses.

Kenneth CitarellaSenior Managing Director, Investigations and Cyber Forensics, Guidepost SolutionsKenneth Citarella joined Guidepost Solutions, a global investigation, compliance, and security firm, after a pioneering career as a computer crime prosecutor. Citarella obtained convictions for numerous cyber crimes and received the Lifetime Achievement Award from the High Technology Crime Investigation Association in 2011.

“Every decision you make in today’s technological environment creates risk,” Citarella warns. As part of the due diligence process, you need to be aware of third-party risk and protect yourself from technology breaches. Cybersecurity risks come from service providers, managers, naïve employees, thumb drives, and even “notoriously filled with malware” hotel business centers. “Good guys don’t have sufficient imagination to think of all the ways the bad guys think. That is how vulnerability is created.”

Make sure your third-party providers are protected. “Edward Snowden is the perfect example of third-party contractor risk. Nobody did adequate due diligence on him.” Know whether a company’s “secret sauce” is protected and monitored. “Some things should always be offline.” Citarella recommends that investors use the FINRA and SEC questions, readily available online, to guide them in discussing cybersecurity policies and practices with managers and service providers.

Rick Di Mascio, Founder and CEO, InalyticsRick Di Mascio established Inalytics after a twenty year career in pension and investment management, previously serving as Managing Director and Chief Investment Officer of CINMan, the in-house Manager of the £25 billion Coal Schemes, and Head of the UK unit of Goldman Sachs Asset Management. Featuring the world’s largest database of investment decisions, Inalytics assesses asset managers by analyzing and identifying manager skill.

“The role of data is to help investors ask the smart questions” and control the due diligence process, Di Mascio says. “It tells you what you need to know about an investment and why it produces results. Looking at data doesn’t point to right or wrong – it just allows you to be more informed.”

A group of smart people together will always make better decisions

than any single member. “

”

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Inalytics evaluates how well managers can time and size positions and how much positions contribute to alpha. Small positions often negatively affect performance. “The manager forgets about it, because he thinks it doesn’t matter.” Di Mascio says, “Skillful managers make good calls 61% of the time, but, understand the context, because markets go in cycles.”

Joseph JaffeChief Compliance Officer and Deputy General Counsel, Guidepost Solutions

Joseph Jaffe has years of extensive experience overseeing investigations for government entities, corporations, and financial institutions. Prior to joining Guidepost Solutions, Jaffe served as District Attorney for Sullivan County, New York, as Assistant U.S. Attorney in the U.S. Attorney’s office for the Southern District of New York, among other significant positions.

Investors often “don’t ‘do’ due diligence, they follow a routine,” Jaffe observes. That doesn’t give them a real answer. Everyone is focused on collecting “facts, facts — facts from the documents”. However, the due diligence process should incorporate collecting facts about the people. Start with a clear picture of what you want to learn and plan how you will get the information. Ask, “What do you need to know about the people, the culture of the company, the culture of the country.” The best way to cover yourself, Jaffe says, is to know with whom you’re doing business. “People who lie about the small things will lie about the big things.”

Asset Management ExpertsBei SavilleSenior Vice President, Senior Client Investment Officer, Endowments and Foundations, Northern Trust Asset Management

Bei Saville develops and oversees policies for asset allocation, risk management, manager selection, portfolio construction, and ongoing monitoring of investment programs. Reflecting on her twenty years of experience as an endowment portfolio manager and multi-asset class investor, Saville imparted her beliefs about best due diligence practices in six words: Beliefs, Portfolio, Inefficiency, Insight, People, and Focus.

To find a differentiated manager that enhances your portfolio, investors must first establish their Beliefs, their core investment philosophy, the investment models that work for them, and what value a particular manager brings to the table. Always “remember to challenge your own biases and beliefs.” Evaluate every manager in the context of the total Portfolio. Seek Inefficiency — great returns can sometimes be sourced from non-economic players, or by backing the winners in high dispersion strategies — Saville encourages investors to distinguish Insight from information and to determine what is really useful in order to ask better questions. Beyond the data, “It is all about People. Know the culture; sit face to face with portfolio managers and analysts. Have conversations with peers.” Above all, “Focus and prioritize. Use your resources wisely.” Know what you do well and delegate or outsource the areas where you are less efficient or knowledgeable.

David WilsonCFA, Managing Director, Head of Institutional Solutions Group, Nuveen Asset Management

David Wilson is the head of Nuveen’s Institutional Solutions Group, which is responsible for developing customized, multi-asset class investment solutions for defined benefit pension plans, insurance companies, workers compensation pools, and other institutions.

Since Wilson joined Nuveen in late 2013, he has focused on “preparing to be ready for investors’ stringent and thorough due diligence processes.” He recognized the need to make a significant investment in both in-house and off-the shelf technology, because “we offer risk-based strategies that are supported by significant market data and sophisticated models.” While Wilson continues to build out the platform, he has created transparent, formal processes that are designed to support efficient investor due diligence and encourages other managers to do the same. Even so, he finds that “institutional investors have become quite sophisticated in conducting effective due diligence.”

Meeting LeadersNolan BeanManaging Principal, Fund Evaluation Group (FEG)

Nolan Bean is a consultant and member of FEG’s Investment Policy Committee and Portfolio Management teams and works with Endowment/Foundation clients on investment philosophy, portfolio construction, manager selection, and overall management.

“Post-Madoff, the due diligence pendulum has swung from being less operationally focused, to operations due diligence becoming somewhat of a commodity.”

People who lie about the small things will lie about the big things.

“”

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While operations is important, getting back to the basics of investing with good people and smart investors is critical. “Ensuring appropriate alignment of interest, and generating outperformance, or alpha, net of fees and after any systematic exposures is the true value of diligence today.” Technology is making this easier in many ways and will continue to enhance the process.

Meredith JonesFounder, MJ Alternative Investment Research

Meredith Jones, a consultant and author of Women of The Street: Why Female Money Managers Generate Higher Returns (And How You Can Too), is an internationally-recognized researcher, writer, speaker, and expert in the alternative investment industry with previous experience at Van Hedge Fund Advisors International, PerTrac Financial Solutions, Barclays Capital, and Rothstein Kass Institute.

Over Jones’s career, due diligence methods have moved from “a handshake agreement with a manager you liked” to a 15-page report, to a 27-page report to a “very intimidating, new 43-page AIMA checklist.” Yet, “we still have problems with funds.” Her advice: “Step away from the checklist,” and build relationships based on trust and transparency. While details are critical to making an allocation decision, investors should ask, “Is this manager doing what you expect them to do? Is the return worth the risk?” By focusing on behavioral alpha and behavioral diversity, investors will better align qualitative input and critical thinking in the manager assessment process.

Alan LenahanCFA, CAIA, Managing Principal, Deputy CIO, Head of Research Services, Fund Evaluation Group (FEG)

Alan Lenahan leads FEG’s Research Services business and is a portfolio manager for FEG’s suite of hedge fund of funds and liquid alternatives portfolios. For over a decade, he has focused on research across the spectrum of hedge fund and other non-traditional investment structures and leverages FEG’s expertise in manager selection, capital markets research, and asset allocation.

Lenahan notes that the industry’s prized “financial degrees” can be an obstacle in performing due diligence. This approach “sucks creativity out of the process and teaches the best way to say NO versus the best way to say YES.”

He finds that current performance-based quantitative systems cannot determine whether a manager adds alpha. They enable further questions, but relying on “quantitative performance data alone would take decades to statistically prove alpha generation, and by then it is gone.”

Keynote SpeakerRobert P. RittereiserChief Executive Officer, The Global Trademaster Company

Robert Rittereiser has extensive experience as an executive, director, and trustee in the financial services industry, including Chief Financial Officer and Chief Administrative Officer of Merrill Lynch & Co., President and Chief Executive Officer of EF Hutton & Co., and Trustee of the Drexel Burnham Lambert Liquidating Trust. As a consultant with Guidepost Partners, he currently leads a receivership team overseeing the liquidation of funds for victims of the Madoff fraud.

Succeeding at due diligence means finding an acceptable combination of competence and integrity in the other party. “You must reach a level of trust and confidence in the person on the other side of the table.” Rittereiser urges investors to take time to really get to know people and understand their background, career training, and path to success. “People develop their thought process and personality within the first 10 years of their life.” Family, religion, historical events, and media will influence their views and ethics. “In times of crisis, people will behave as they have succeeded.”

When evaluating businesses, check for strengths as vigorously as you check for problems, and determine whether those strengths are sustainable. “More often than not, weaknesses in the core business are noticed too late,” and management will focus on fixing the core business before attending to other problems. “Check the legitimacy of a business that is steadily outperforming the industry. What seems too good to be true may be too good to be true.”

The Global Trademaster Company is an enterprise intelligence platform that uses military technology to monitor the global supply chain for U.S. companies. From this perspective, he advises caution when outsourcing. “Make sure the provider’s tactics are in sync with your strategy.” If not, fix the situation quickly. “Recapture control of your destiny. When you outsource, you outsource your reputation.”

Generating outperformance, or alpha, is the true value

of due diligence today.“

”

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You cannot know enough about a company in which you are considering investing until you know their cybersecurity profile. As we discussed during the workshop, recent well-publicized intrusions and data breaches have taught us the questions to raise. Given the increasing lawlessness of the cyber frontier and the skyrocketing financial and reputational consequences assailing compromised enterprises, the failure to include cybersecurity in a due diligence investigation may seriously compromise any investment.

Among the key issues to be addressed are:

•Third party vendors can be an Achilles heel for any organization. Who else has authorized access to the network, for what purposes, and is that access tightly controlled and monitored? Who else is involved in processing the entity’s data, for what purposes and how is it done? The cybersecurity of every third party vendor is then critical to the cybersecurity of your investment objective.

•Deleting old data is overlooked far too often. Even if a company retains only the data it absolutely needs, it must still have an enforced policy to delete unused data from its network. If an intrusion does happen, it is unforgiveable if its scope is enhanced because of the release of data that is no longer of any use to the company but still precious to the customer or employee.

•Encryption of data is essential. Every enterprise must know what data it has, where it is, how it moves through the network and who has access to it. But that is not sufficient by itself. That data must be unreadable to all unauthorized parties. The failure to encrypt has not only become scandalous but may well be considered an unfair consumer practice.

•Passwords must be secure enough so they cannot be easily broken. This is some of the oldest advice in the annals of cybersecurity and is still too often ignored.

•Learn from mistakes you and others have made before. Nothing is secret about how most intrusions and breaches occur and yet the same mistakes continue to be made and some companies even get victimized a second time by the same means. Ask any investment subject if they have been compromised in the past and what have they done to prevent a recurrence. Ask them about the techniques deployed in other breaches and if they have adjusted accordingly.

•A Cybersecurity Awareness Program must be in place. Employees need training on an ongoing basis and employers must have the means to test that awareness and improve it.

•Cyber Incident Insurance can help mitigate the crushing cost of dealing with a breach and therefore protect your investment. Is it in place and what does it cover?

•Regular cybersecurity reassessment is essential. Any business you are considering for investment must have a program to test its security and make improvements. Spending more money or buying the latest technology is not always the best approach. Security dollars must be spent intelligently and effectively. Find out how they devised their security profile, how they test it and how they seek to improve it.

None of the key points listed above are easy to resolve. A thorough due diligence which includes cybersecurity may well require expert assistance just like a financial statement review. Select your cybersecurity advisor in advance. They can help you understand what you need to assess and how to do it effectively and efficiently.

Making Cybersecurity Part of Due DiligenceKenneth Citarella, Senior Managing Director, Guidepost Solutions

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Expert Speaker AffiliationsALPHAPIPE

AlphaPipe is powering the next

generation of investing processes and services through network operating and data efficiencies coupled with independently reviewed security and control. We eliminate the excess burden of providing, gathering and structuring due diligence and other monitoring information for the investment management industry. Information streams replace emailed documents and power the network’s exception-based workflow. AlphaPipe’s intelligent Q&A tool, integrated Form ADV data set, and systematic alerts are fully customizable to the specific needs of all functions within our investor, asset manager and service provider clients.

ASPN SOLUTIONSASPN Solutions offers ASPN (“AltShare Private Network”), a financial technology that challenges how Institutional Investors have been managing their processes. ASPN Solution’s first

product is a comprehensive front, middle, and back office solution designed to empower institutional investors to build, execute and monitor direct, multi-manager hedge fund portfolios. The ASPN system combines a state-of-the-art technology with the ability to selectively share information and collaborate with like-minded investors to improve every aspect of the investment process.

FUND EVALUATION GROUPFund Evaluation Group, LLC (FEG) provides investment

consulting, portfolio management and research services to predominantly institutional clients, such as universities and corporate retirement plans. Established in 1988, the independently-owned firm has approximately $49 billion in total client assets under advisement. FEG specializes in designing sophisticated, institutional portfolios. Services include investment policy development, portfolio design, asset allocation, manager due diligence, plan monitoring, and research and education for board members and their staff. FEG’s research analysts are experienced in the industry, with the average analyst possessing more than 12 years of investment experience. Our research team conducts hundreds of manager meetings per year.

GUIDEPOST SOLUTIONSGuidepost Solutions is a global leader in investigations, due

diligence, cyber and technology security consulting, immigration and cross-border consulting, and monitoring and compliance solutions. We help companies, government agencies, individuals and their advisors solve problems, advance business opportunities, mitigate risks and resolve disputes – among many other services. Our professional team includes former federal and state prosecutors and law enforcement officials and leaders in the security, investigations, intelligence, and public safety communities. Our solutions protect lives, assets and reputations.

INALYTICSEstablished in 1998, Inalytics is the brainchild of

Rick Di Mascio and the culmination of his twenty years of experience in pensions and investment management. The Inalytics service helps Asset Owners select and monitor Asset or Transition Managers, and furthers talent development for Asset Manager teams. The Inalytics software and consulting services have received multiple industry awards and are valued by clients in Australia, Germany, Italy, Malaysia, the Netherlands, South Africa, Sweden, the UK and the USA.

MJ ALTERNATIVE INVESTMENT RESEARCH Meredith Jones founded MJ Alternative Investment Research (MJ Alts) in July

2014 to provide investors, asset managers and service providers with access to high-quality research and value-add consulting services. Relying on her 17-year history as an allocator, researcher, business strategist, content developer and marketer, MJ Alts provides specific and critical industry insight and expertise. In the last 4 years alone, Meredith has provided consulting services to more than 200 venture capital, hedge funds, private equity funds, funds of funds, family offices and other investors, while also creating industry leading content for dozens of white papers, events, and webinars. Her research has been featured in the New York Times, CNBC, Reuters, the Wall Street Journal and more.

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tjb RESEARCHThrough tjb research, Tom Brakke provides a wide range of consulting services to asset

owners, asset managers, consultants, and advisory firms, including independent reviews designed to identify areas for organizational improvement. He specializes in the qualitative aspects of due diligence, including the standards and processes that are applied by those performing due diligence. Tom offers assessments of the due diligence practices of organizations and private workshops for the training of staff members. His first public workshop will take place later this year.

Keynote SpeakerTHE GLOBAL TRADEMASTER COMPANYThe Global Trademaster Company offers an Enterprise Intelligence Platform that is highly scalable, highly secure, and provides actionable enterprise intelligence at near real time speed. Chief Executive Officer Robert P. Rittereiser has extensive experience as an executive, director and trustee in the financial services industry. During his career, he has been Chief Financial Officer and Chief Administrative Officer of Merrill Lynch & Co., President and Chief Executive Officer of EF Hutton & Co., President and CEO of Nationar, a New York Banking Services Company and, most recently, Chairman and CEO of Gruntal Financial, LLC. Additionally, Mr. Rittereiser served as a Trustee of the DBL (Liquidating Trust Drexel Burnham Lambert) and has served as a Director for several public corporations. As a consultant to the financial services industry with Guidepost Partners, Mr. Rittereiser has most recently served as the lead on the Bart Schwartz Receivership team regarding the liquidation of one billion dollar funds for victims of the Madoff fraud. Mr. Rittereiser served as a founding director and chairman of the National Securities Clearing Corporation as well as Governor of the National Association of Securities Dealers and director of both the Depository Trust Company and the Chicago Board Options Exchange.

Asset Management FirmsExpert Speakers

NORTHERN TRUST ASSET MANAGEMENTTo meet the needs of sophisticated investors like you, we create

multi-manager investment programs that are completely customized. It begins with a clear understanding of your objectives. Only then do we design a tailor-made investment program that features individualized services, innovative products and cutting edge technology. From actively managed international and U.S. equity and fixed income, to emerging and minority managers, to alternatives, you’ll find answers beyond the expected.

NUVEEN INVESTMENTS Nuveen Investments is a multi-affiliate asset management company headquartered in Chicago. Our affiliates

deliver excellence across asset classes through teams of investment experts. As of March 31, 2015, we manage approximately $233.2 billion across 7 independent affiliates. We deliver investment solutions to corporations, public and multi-employer pension funds, foundations and endowments, high-net-worth individuals, insurance companies, and governments.

Nuveen Investments utilizes an integrated distribution platform, drawing upon the focused expertise of its independent investment affiliates: Nuveen Asset Management, Symphony Asset Management, NWQ Investment Management Company, Santa Barbara Asset Management, Tradewinds Global Investors, Winslow Capital Management and Gresham Investment Management. Together these deeply specialized teams, each with a distinct style and process, provide our customers with broad and deep investment expertise in growth and value equities, international and global equity strategies, real assets and infrastructure, fixed income and market-neutral investments, and low volatility strategies.

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Discussion Group Participants ACADIAN

Acadian has been an innovator in global asset management since 1986. As of June 30th, 2015, the firm managed over $70 billion in

assets for many of the world’s leading institutions, applying a disciplined framework to the broadest possible investment universe. Led by a team whose professional ties extend back to Acadian’s founding over 25 years ago, the firm specializes in active global and international equity strategies. Drawing on proprietary data and techniques covering over 40,000 securities in more than 60 markets worldwide, the firm focuses its extensive research capabilities on developing customized investment management strategies for its clients.

AVEC CAPITALAvec Capital offers outsourced marketing and business development solutions to institutional quality asset managers. We seek to

partner with best-in-class investment talent pursuing clearly differentiated strategies. Avec Capital brings both financial and intellectual capital to our strategic partnerships, investing personally alongside them while helping them build lasting relationships with world-class asset allocators. Due to our highly personalized approach, we represent a small number of firms, are very selective in choosing our partners and are committed to having in-house, institutional quality due diligence expertise. Avec Capital has an accurate pulse on the marketplace and opens doors to thought leaders in the global institutional investor community. Our team is driven, connected and committed, and we foster a culture of trust, respect and confidence with our clients.

BEACHHEAD CAPITAL MANAGEMENTBeachhead Capital Management is a registered investment

advisor based in New York that provides hedge fund investment solutions to sophisticated investors. Beachhead has published extensive research on the hedge fund industry, including why hedge fund fees remain high, how various liquid alternative strategies compare to direct hedge fund portfolios, how the industry structure is changing, and how

investors can complement existing portfolios while reducing fees, improving liquidity and transparency, and enhancing risk management. BURGUNDY ASSET MANAGEMENT

Founded in 1991, Burgundy is 100% independent and owned

by its employees, managing approximately US$20 billion in North American, international, emerging markets and global equity strategies. We follow a disciplined value investment philosophy, aiming for strong absolute returns in the long term while protecting capital in down markets. Our research is devoted to assessing the fundamentals, management and valuation of high‐quality companies from the bottom-up. We build concentrated portfolios without reference to any benchmark. We believe that aligning ourselves with like-minded investors who share the same goal is a critical element to our success.

CLEARBRIDGEClearBridge Investments is a well-established global investment manager, owned

by Legg Mason, with approximately $117 billion in assets under management. With a legacy dating back over 50 years, our long-tenured portfolio managers and fundamental research team focus on building equity portfolios for clients who seek income solutions, high active share or low volatility. At ClearBridge Investments, all equity strategies start with the same fundamental principle: the key to long-term success is selecting high-quality companies through rigorous research and analysis. Driven by the insight and expertise of portfolio managers and analysts, ClearBridge’s time-tested investment process has guided the Firm throughout its history. Strengthened by advanced trading and risk management systems, ClearBridge’s disciplined, methodical approach is designed to achieve consistent top-tier performance over the long term.

CLINTON GROUPClinton Group, Inc. is a diversified asset management company,

formed in 1991 as a Delaware corporation, registered to do business in New York. It is a SEC Registered Investment Adviser. The firm uses the extensive market experience of its professionals and a multitude of

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proprietary analytical models and computer systems to evaluate relevant fixed income and equity markets. Throughout its twenty two-year history, Clinton has created a risk/return profile in several distinct strategies based primarily on the extraction of relative value and the capturing of arbitrage opportunities.

MARINUS CAPITAL ADVISORS LLCMarinus Capital Advisors LLC is an alternative fixed income

asset manager specializing in the broad spectrum of structured products. The firm was founded in 2010 by Najib Canaan, who formerly was Head of Structured Finance at GSO Capital (a Blackstone Group affiliate) and Head of Structured Products at Brevan Howard. In April 2012, Marinus launched its institutionally-backed commingled fund, Marinus Opportunities Master Fund LTD, which seeks to deliver absolute returns with relatively low volatility and low correlation to major market indices. The firm currently manages approximately $440 million in assets across commingled and bespoke vehicles. Marinus is an SEC-registered investment advisor and has 17 employees based in Darien, CT.

PRINCIPAL GLOBAL INVESTORSPrincipal Global Investors is a diversified investment management firm that uses a multi-boutique platform encompassing real estate,

equities, fixed income, hedge funds and currencies. Currently, PGI manages $346 billion for a global client base with 20 locations around the world. PGI’s parent company is Principal Financial Group founded in 1879 and NYSE listed (“PFG”) with 14,800 employees around the globe. Within real estate, PGI currently offers: US private equity commercial real estate in core, value-add and opportunistic green funds, US and Global REITS, private US real estate debt; and an opportunistic high yielding CMBS strategy. Within equities, key strategies include global opportunistic, emerging markets, small cap international, and US mid cap. Within fixed income, key strategies include opportunistic credit, EM debt long/short, high yield, and preferred securities. The macro currency team offers active hedging and absolute return currency fund strategies. The firm also offers a multi-manager diversified real asset strategy to investors.

PROTÉGÉ PARTNERS, LLCProtégé Partners, LLC (“Protégé”) is a specialized asset management firm that

was founded in 2002 to focus exclusively on investing in established smaller hedge funds and select emerging managers. Differentiated from the broader universe of hedge fund investors that principally focuses on large, widely held funds, Protégé is recognized as an industry expert in what it believes is the highly attractive, less efficient, and under allocated universe of smaller hedge funds. By deploying its expertise through a unique model of investing, one that blends seeding and arms-length investments, along with thematic and tactical opportunities, Protégé works with some of the most sophisticated institutional investors in the world to complement and complete a robust hedge fund program. In addition to Protégé’s commingled investment strategies, Protégé constructs customized portfolios that focus on the Fund’s core competencies in order to address a broad range of needs faced by our investors. Customization can range from very concentrated portfolios to strategic portfolios that have a specific strategic or regional focus. Protégé is 100% employee owned, maintains a substantial co-investment alongside clients and proudly cultivates a culture that thrives on innovation, transparency, technology, and alignment of interest with investors. Headquartered in New York with an office in Singapore, Protégé currently employs over 30 professionals. RISCURA

RisCura is an investment advisory firm with clients

including institutional investors with over $200 billion in assets under management, as well as a significant number of asset management, hedge fund and private equity firms. With offices across Africa in South Africa, Namibia, Zambia, Zimbabwe, Nigeria and Mauritius, as well as offices in London and Boston, RisCura works with the largest African investor base in listed and unlisted African investments.

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SAVANO CAPITALSavano Capital is a direct secondaries investor that is the go-to source of liquidity for minority, non-institutional

shareholders who seek to sell some or all of their stock in private venture-backed companies. Savano specializes in providing cash liquidity alternatives for company founders, former and current executives, angel investors, friends and family, warrant holders and corporate strategic investors. Savano Capital (originally BrownSavano Capital) was founded in 2010. The four senior team members have been executing on this strategy together since 2008; they are supported by two additional junior investment professionals. The firm is headquartered in Baltimore, MD with a second office in Washington, DC.

SORIN CAPITALSorin Capital Management, LLC is a Stamford, Connecticut-based

management firm focused on CMBS and REITs and runs hedge fund, ’40 Act liquid alternative, and value-add long-only strategies within these markets. Sorin currently manages over $700mm in AUM from pension funds, family offices, and fund of funds.

TWIN CAPITAL Founded in 1988 by David Simon, Twin Capital Management LLC pursues

an active money management style designed to achieve superior capital appreciation independent of the cycles and returns normally found in the equity markets. Its investment philosophy is value- and event-oriented, specializing in the identification and analysis of securities that can benefit from catalytic events from which value can be captured. The funds invest long and short in a highly selective portfolio of equities in three core event driven strategies: Merger Arbitrage, which entails mergers, acquisitions, hostile offers and leveraged buy-outs; Special Situations encompassing securities subject to reorganizations, spin-offs, proxy contests, litigation and short sales and Deep-Value with Catalyst situations consisting of securities subject to management change, shareholder activism, industry consolidation, clarification of operations, strategic change and shareholder turnover.

ContributorsCASTLE HILL CAPITAL PARTNERS

Castle Hill Capital Partners, Inc. provides an innovative and integrated offering centered on “Alpha and Assets.” The firm

offers strategic capital raising, independent research distribution, business consulting and brokerage solutions. The experienced team has held leadership roles in cash equity trading, prime brokerage, operations, capital raising and institutional marketing. We define success by helping our clients achieve their unique goals.

CHRISTOPHER HOLT, CAIAChristopher Holt is widely-recognized in the alternative investment field for his role as a moderator, educator and author. He founded one of the first hedge fund blogs, which was ranked by Pensions & Investments as one of the world’s top 10 and was cited in Congressional testimony. He has moderated panels of hedge fund managers, policy makers, Nobel laureates and institutional investors in 11 countries. Holt has served on the Journal of Alternative Investments editorial board and helped build the Chartered Alternative Investment Analysts (CAIA) Association as its first Director of Industry Relations in the Americas. Currently, he is an advisor to the Global Absolute Return Congress and to the CAIA Association, is an adjunct professor at Seneca College in Toronto, and consults to various hedge funds.

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Investment Officers David MartinDirector of Alternative Investments Adventist Health System

Mark SteedLead Portfolio & Chief of StaffArizona PSPRS

Anthony GattusoSenior Investment AnalystCleveland Clinic

Timothy Price, CFAChief Investment Officer Contra Costa County Employees’ Retirement Association

Jenny Chan, CAIASenior Investment OfficerDoris Duke Charitable Foundation

Mark BaumgartnerChief Investment OfficerInstitute for Advanced Study

Robert Ewers, CFASpecialist, Treasury and RiskInter-American Development Bank

Burton YuenSenior Director, Financial Assets DivisionKamehameha Schools

Shane McAndrew, CFADirector of InvestmentsVillanova University

Agata R. Praczuk, CAIAAssociate Director, Hedge FundsMetLife

Philip Zecher, PhDSenior Advisor to the President for InvestmentsMichigan State University

Chad Myhre, CFA, CAIASenior Investment OfficerMissouri State Employees Retirement System

Jason KleinSenior Vice President & Chief Investment OfficerMemorial Sloan Kettering Cancer Center

Timothy Viezer, PhD, CFA, CAIAInvestment Director - Public, Hedged EquityNorth Carolina Department of State Treasurer

Russell NiemieChief Investment OfficerNew York State Nurses Association

David Finstad, CFADirector, Hedge Fund Management OMERS Capital Markets

Michael Nicks, CFA, CAIADirector of InvestmentsPepperdine University

Elizabeth HewittCheif Investment OfficerSloan Foundation

Amy ChenChief Investment OfficerSmithsonian Institution

Steven KeatingDirector of InvestmentsSt. John’s University

Erin Abouzaid, PhD, CFAChief Investment Officer Stony Brook Foundation

Panayiotis Lambropoulos, CAIA, FRMPortfolio Manager of Hedge FundsEmployees Retirement System of Texas

Christopher M. Schelling, CAIADirector of Private EquityTexas Municipal Retirement System

Dominic Blais, CFA, CAIASenior Portfolio Manager, Public AssetsThe Canadian Medical Protective Association

Sonali Dalal, CFASenior Director, Investment Strategy & ResearchThe Pennsylvania State University

Jonathan Brelsford, CFAVice President of InvestmentsThe Pittsburgh Foundation Michelle Pak, CFA, CAIAManaging DirectorThe Rockefeller Foundation

Colin G. Ambrose, CFAChief Investment OfficerUJA-Federation of New York

Jonathan Shear, CFAChief Investment OfficerUniversity of Utah

Caitlin FitzmauriceAssociateUniversity of Virginia Investment Management Company

Daniel Ward, CFADirector of InvestmentsVirginia Tech Foundation

Dennis WilberDirector of Investments & TreasuryVisiting Nurse Service of NY

Reginald Sanders, CFA, CAIADirector of InvestmentsW.K. Kellogg Foundation

John KreiterSr. Investment OfficerWyoming Retirement System

Ahron HerringChief Investment OfficerYeshiva University

David Slifka, CFASenior Portfolio MgrYMCA Retirement Fund

DoDiligence™ Participants (Alphabetically by Institution)

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Asset Management Professionals Ted NoonSenior Vice President, Director, North American Business DevelopmentAcadian Asset Management LLC

Christine Z. KelleherManaging DirectorAvec Capital

Andrew BeerChief Executive OfficerBeachhead Capital

Caroline Montminy, CFASenior Relationship ManagerBurgundy Asset Management

David ChowDirector, Institutional SalesClearBridge Investments

George HallFounder, Chief Executive Officer & Chief Investment OfficerClinton Group

Tom MunsterManaging Director, Business DevelopmentClinton Group

Anthony DiNotaHead of Business DevelopmentMarinus Capital Advisors, LLC

Nazneen KangaSenior Vice President, Multi-Manager SolutionsNorthern Trust Asset Management

John KeshnerSenior Vice President, Foundations & EndowmentsNorthern Trust Asset Management

Bei Saville, CFA, CAIASenior Vice PresidentSenior Client Investment Officer Northern Trust Asset Management

Jason PsomeSVP, U.S. Institutional SalesNuveen Investments

David WilsonMD, Head of Institutional Solutions GroupNuveen Investments

Dale KindreganDirector, Institutional Marketing, Endowments & FoundationsPrincipal Global Investors

John D. Mackin, CFAPresident & Senior Managing DirectorProtégé Partners, LLC

Kerry Kilcullen SinclairPrincipal, North AmericaRisCura Solutions

Bion LudwigCo-Founder, PartnerSavano Capital Partners

Chris RaeManaging Director, Head of Business DevelopmentSorin Capital Management, LLC

Sarah ColvinVice President Investor Relations & MarketingTwin Capital Management LLC

Expert Speakers Westley (West) ChapmanChief Executive Officer & Co-FounderAlphaPipe

Ken Akoundi, PhDPresidentASPN Solutions

Kenneth CitrellaSenior Managing DirectorGuidepost Solutions LLC

Joseph JaffeChief Compliance Officer & Deputy General CounselGuidepost Solutions LLC

Rick Di MascioFounder & Chief Executive OfficerInalytics

Robert P. RittereiserChief Executive Officer The Global Trademaster Company

Tom BrakkePrincipaltjb research

Meeting Leaders Nolan BeanManaging Principal Fund Evaluation Group

Alan Lenahan, CFA, CAIAManaging Principal, Deputy CIO & Head of Research ServicesFund Evaluation Group

Meredith JonesFounderMJ Alternative Investment Research

Cathleen RittereiserFounder & Chief Executive Officer Uncorrelated, LLC

Contributors Melissa SantanielloFounderAlignment of Interests (AOI)

Andrew SaundersSenior Managing DirectorCastle Hill Capital Partners, Inc.

Christopher HoltCWA Holt Advisors

Jonathan FalkClass of 2017, Finance & Business LawIndiana University–Kelley School of Business

Mary Beth GlaccumInstitutional Investment Professional

Karan Sampson, CAIAManaging DirectorKSD Consulting

Morgan BestSales Associate, Institutional Marketing Principal Global Investors

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About Uncorrelated, LLCUncorrelated, LLC develops, mentors and inspires future institutional investment leaders by bringing investors together with asset managers, service providers, and industry experts to collaborate on solving common investment problems and brainstorming long-term themes and ideas. We describe it as an “Act Tank” because we focus on achieving outcomes, publishing the results in white papers and distributing them broadly to benefit all. Uncorrelated initiatives are designed to stimulate long-term thinking and generate new ideas. The collaborative, discussion-based activities build collegial, productive, professional relationships and inspire ongoing industry discussions and learning.

Founder and CEO Cathleen Rittereiser is the co-author of the books Foundation and Endowment Investing (Wiley, 2008) and Top Hedge Fund Investors: Stories, Strategies, and Advice (Wiley, 2010). Prior to founding Uncorrelated, Rittereiser spent 20+ years as an investor relations and marketing executive with leading financial services firms and hedge fund complexes. She holds an M.B.A. from NYU’s Stern School of Business and an A.B. in English and Business from Franklin & Marshall College, where she serves on the investment committee.

For more information W: theuncorrelated.wordpress.comTwitter: @theuncorrelated E-Mail: info@uncorrelated.us

Conclusion Reinventing due diligence in the course of a one-day workshop may seem overly ambitious. Yet, as an industry “Act Tank” focused on developing and mentoring next generation investors, Uncorrelated had to try. Our investor constituents do due diligence. It is a key component of the entire investment process and forms the bulk of investment officers’ responsibilities. Why not change a process that investors, managers, and experts all agreed had become more onerous and less effective?

Spurred on by thought partner Jason Klein, CIO of Memorial Sloan Kettering Cancer Center, and lead advisor Northern Trust Asset Management, Uncorrelated organized a sold-out, stellar group of investors, managers, and experts. The rooms buzzed as investors and managers conversed and expert speakers described new developments in technology, data and analytics, and qualitative thinking.

Our discussions ultimately derived a framework to guide investors toward reinventing their due diligence processes. Driven by three themes – Fiduciary, Flexibility, and Forethought – the recommendations reflect the need to optimize resources, integrate due diligence into the entire investment process, and implement insightful analytics and efficient technology.

DoDiligence™ brought together leaders of the next generation of institutional investors, top asset managers, and industry experts. Great minds joined to collaborate on an industry challenge, engage in discussions, and generate ideas. Participants gained insights, developed relationships, and produced an outcome. This paper documents the results and will help you begin to rethink your approach due diligence. We look forward to hearing your thoughts.

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Maureen BesharNuveen Investments

Kevin GahwylerTwin Capital Management

Patricia GambaleGuidepost Solutions

James GruverBlack River Asset Management

Larry KochardUVIMCO

Joan LarsonSandalwood Securities

Robert LeeTexas ERS

Nina LesavoyAvec Capital Management

Lori McEvoyClearbridge Investments

Nancy MillerNexChange

Rebecca RandallThe Brand Kitchen

Bart SchwartzGuidepost Solutions

Jeffrey TarrantProtégé Partners

Jeanne UlicnyUlicny, Inc.

Additional thanks to

Acknowledgements To do DoDiligence™ – Reinventing the Due Diligence Process, I relied on the guidance, support and efforts of the individuals and organizations acknowledged here.

Our CIO, or “Chief Instigation Officer,” Jason Klein from Memorial Sloan Kettering Cancer Center, has long been a leader among next generation CIOs. Thoughtful and insightful, with a flair for branding, it was my privilege to collaborate with him.

Northern Trust Asset Management provided essential “Collaborative Capital.” Their intellectual capital – ideas and expertise that improved the format and informed the results – and financial capital made the program possible. I thank Northern Trust for their investment in investor education and thought leadership.

Dr. Ken Akoundi of ASPN Solutions offered excellent ideas and timely content. Via his daily e-mail newsletter, Investor DNA, he introduced DoDiligence™ to new investor participants. I am also grateful to Nolan Bean, Alan Lenahan and the Fund Evaluation Group for serving as the advisory board to Uncorrelated.

Thank you to all the participants, Karan Sampson for investor relations and editorial contributions, and Christopher Holt for crucial curriculum structuring. And gratitude to my dear friends Andrea Szigethy and Donna Holly from the Investment Institute.

Finally, I want to thank my father, Robert P. Rittereiser, for championing my vision for Uncorrelated, and for sharing many due diligence lessons as our keynote speaker. After several decades on Wall Street, he’s still engaging, achieving, and doing the right thing. And that’s the best lesson of all.

The DoDiligence™ project moved the industry forward by creating a framework for reinventing due diligence and identifying new ideas and actionable tactics. At Uncorrelated, we aim to reimagine other investment processes in future whiteboard projects and related initiatives. We hope you will join the conversation.

Cathleen M. RittereiserFounder and CEOUncorrelated, LLC

Produced by Christopher Kornmann at Spit + Imagewww.spitandimage.net

In memory of Eddie Szigethy

©Uncorrelated, LLC 2015. All Rights Reserved