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AIMA updates due diligence questionnaire for selecting a fund of hedge funds manager

Wednesday, June 03, 2015
Opalesque Industry Update - The Alternative Investment Management Association (AIMA), the global hedge fund industry association, has published an updated edition of its due diligence questionnaire (DDQ) for pension funds and other investors to use when selecting a fund of hedge funds manager.

The AIMA DDQ for Fund of Hedge Funds Managers is used by prospective investors prior to making an allocation and is considered to be the industry-standard template. By having a standardized set of questions, the DDQ also helps managers of funds of hedge funds to respond efficiently to requests for information from multiple investors. The DDQ includes questions related to the management firm's investment philosophy and style, governance practices, operational infrastructure, risk management procedures and potential conflicts of interest.

AIMA said there was strong demand for an updated version to reflect regulatory changes since the DDQ was previously updated in 2009, including the Alternative Investment Fund Managers Directive (AIFMD), which took effect in 2014, and other matters of interest to regulators such as dealing commissions and cybersecurity, as well as the September 2014 update to AIMA's flagship Hedge Fund Manager DDQ.

AIMA consulted with a broad range of hedge fund managers and institutional investors during the drafting of the new DDQ and their input was integral to the new revisions.

Jack Inglis, AIMA CEO, said: "The due diligence process continues to be the single most important step that investors in funds of hedge funds can take to safeguard their investments. This is why our Questionnaire for the Due Diligence of Fund of Hedge Funds Managers remains an absolutely critical tool for investors."

He added: "The publication of this updated DDQ comes at an interesting time for the funds of hedge funds sector, which despite a challenging period during the financial crisis still comprises approximately one-quarter of total hedge fund industry assets worldwide. With many pension funds and other investors exploring the feasibility of investing in funds of funds for the first time, we hope that this updated questionnaire will prove a useful tool during the vitally important due diligence process."

AIMA's full suite of DDQs, launched in 1997, covers the selection of hedge fund managers, CTAs, fund of hedge funds managers, clearing members, prime brokers and administrators. They are available for AIMA members only and may not be transferred to any other party.

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