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Matthias Knab, Opalesque for New Managers: Fundraising has never been more competitive - or more operationally demanding. Allocators today want more than just performance and pedigree. Increasingly, they want operational assurance before they'll even schedule a meeting.
That shift has given rise to a new tool that's gaining traction across asset classes and fund sizes alike: Castle Hall's DDX Benchmark Report. Think of it as an allocator-style operational due diligence (ODD) process - run privately and confidentially - for the benefit of the investment manager.
And managers are taking notice, because this comes with a host of benefits.
The New Reality: ODD moves to the front of the line
"Fundraising is already hard enough," says Ben Cunliffe, Director at Castle Hall Alternatives, which has conducted over 10,000 due diligence reviews across 2,500+ managers in its 20-year history. "Managers are telling us that any new ammunition they can have when walking into meetings is incredibly important."
That "ammunition" increasingly takes the form of proactive operational reviews that help managers identify and address potential red flags before investors discover them. Castle Hall's DDX Benchmark Report - a confidential, manager-facing operational assessment - simulates an investors ODD process.
What sets the Benchmark apart is its ability to mirror the expectations of institutional allocators. It doesn't just check for the existence of policies; it asks whether those policies are implemented correctly, monitored effectively, and consistent across the managers platform.
"Its a mock ODD," explains Ben Cunliffe, Director at Castle Hall. "But one that's performed before investors arrive with their own questions. We want managers to see around corners and avoid being blindsided."
Confidence is Power
The process works by conducting structured reviews against institutional best practices across key areas including governance, valuation, cybersecurity, compliance, and fund administration. But unlike traditional ODD, which can feel adversarial, the benchmark approach is designed to build manager confidence.
"What I've found interesting is when I talk to managers, the calls always start with how great their fund and strategy is," Cunliffe notes. "But when I start probing on the operational side, you can see they take a step back - they're not so confident anymore. The benchmark gives them that confidence back."
The data supports this concern.
Castle Hall's research reveals that 80% of managers have operational gaps they are unaware of, and the findings often surprise even experienced teams:
- Cash controls: 10% of funds still allow single-signature transfers, while 6% don't verify new payment instructions
- Valuation oversight: 33% of sub-$500 million PE firms rely solely on deal teams with no committee or written policy
- Cybersecurity gaps: Missing endpoint protection and inadequate training remain common
- Governance issues: Undocumented board meetings and unclear decision-making processes
Benchmarked to your peers - not just a checklist
Unlike generic checklists, Castle Hall's Benchmark process includes comparative analysis. A long/short equity hedge fund, for instance, is measured against similar funds in terms of governance and controls - not against a private credit platform or infrastructure vehicle.
This comparative element provides real insights.
"Managers want to know how they stack up," Cunliffe says. "Especially newer firms. They're trying to build credibility in front of sophisticated LPs. A Benchmark Report gives them insights and a development perspective - and the data to back it up."
Verification as marketing asset
While the Benchmark Report is a private document for internal use, it unlocks a powerful tool: the DDX Verification Report, a shareable, allocator-facing due diligence summary that confirms an investment manager has completed a structured operational review. It is updated quarterly, and managers can include it in their pitch decks or data rooms.
"The verification is essentially your public-facing stamp," Cunliffe says. "It shows you have already been through an institutional-grade process. It turns ODD from a hurdle into a marketing asset."
Notably, allocators gain access to the verification report at no cost - and can download it instantly via Castle Hall's diligence exchange platform. That's a win for both sides of the fundraising table: reduced friction, faster trust, and shorter time-to-capital as it allows LPs to focus more on strategy and performance rather than administrative back-and-forth.
"The verification report covers about 55% to 65% of ODD questions that typically get asked," Cunliffe explains. "By cutting that down, there's huge savings on both the manager and allocator side."
Cross-Asset Applicability
The methodology applies across all alternative investment strategies, from hedge funds and managed futures to private equity, venture capital, and private debt. Castle Hall's standardized framework means allocators can quickly assess operational readiness across different managers and strategies using consistent criteria.
Interestingly, the service proves valuable for managers of all sizes. While emerging managers use it to build institutional credibility, larger firms often employ benchmark reviews when launching new strategies or validating existing processes against current industry standards.
The AI Factor
One of Castle Hall's unexpected findings has emerged around artificial intelligence usage. As AI tools become more prevalent, some managers are using them to complete due diligence questionnaires - often with problematic results.
"It becomes very apparent to us when a DDQ has been filled in by AI," Cunliffe observes. "When managers use AI because they don't have time to do the hard work themselves, it raises red flags. Your DDQ should be your source of truth, and when it becomes a generalized source of truth, that's concerning."
Castle Hall uses AI internally - what they call "Diligence Intelligence" trained on 20 years of benchmark data - but emphasizes that AI plus experienced analysts, rather than AI replacement, is the key to maintaining quality and accuracy.
How to save $3.8bn annually
With an estimated $3.8 billion spent annually on DDQ responses across the industry, the repetitive nature of operational due diligence has created significant inefficiencies. Proactive benchmarking and the availability of Castle Hall's DDX Verification Reports represent a solution that benefits all parties: managers gain confidence and competitive advantage, while allocators receive standardized, reliable operational assessments faster.
Cunliffe explains: "Many managers tell us their are pleasantly surprised by how cost-effective the combined Benchmark and Verification Report package is - particularly given the confidence it brings during fundraising. In fact, several have shared that they have comfortably allocated the cost to fund operations, seeing it as a modest investment that helps them stand out in a crowded market."
As one manager recently told him when seeking to convince his chief compliance officer: the question isn't whether operational preparedness matters, but whether you want to address potential issues on your timeline or wait for investors to discover them on theirs.
For managers interested in learning more about the DDX Benchmark process, you can request a free sample report here.
Preferred Pricing for managers who take action
Opalesque has secured preferred pricing for managers looking to complete Castle Hall's Benchmark + Verification process in 2025.
Simply mention that you saw this via Opalesque, and Castle Hall will ensure you access preferred terms.
Book a short call with Ben Cunliffe here.
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