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Alternative Market Briefing

Investors search social media platforms for the pre-investment background investigation

Wednesday, August 14, 2019

Laxman Pai, Opalesque Asia:

A new investor and operational due diligence (ODD) analyst survey revealed that investors shift focus to social media analysis during hedge fund and private equity background investigations.

62% of respondents stated that within the past year they have begun to search social media platforms such as Facebook, LinkedIn, Twitter and Instagram as part of the pre-investment background investigation process, according to Corgentum Survey.

Searches were on both the social media activities of the fund management company and individual employees. 38% stated that they have uncovered at least one negative item during social media searches that were omitted from more traditional investigations.

Additionally, 73% of respondents stated that would benefit from increasing the ongoing monitoring of fund managers social media on a post-investment basis.

Investors also felt that increased analysis of more traditional background investigation areas such as regulatory filings is increasingly producing diminishing marginal returns.

While 84% of investors stated they would like to be notified when a fund manager revises a filing such as the Securities and Exchange Form ADV, citing the sanitized nature of these filings, only 13% said that the information in these updates was useful in making an initial or ongoing risk assessment.

As a result, 48% stated they found more benefit in increasing the scope of litigation and criminal searches ......................

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