Best Practice for Business Due Diligence


  • Institutional investors and investment advisors look beyond investment strategies, risk and return when selecting the right manager
  • When a manager is down to the short-list as part of a selection exercise, a review of the entire business is a key final step – some managers do not make the cut

Why is it important for our clients?

  • All investment managers offering products and strategies to asset owners and institutional investors are required to demonstrate ‘best’ or ‘good’ practice in business operations
  • By not adhering to ‘good’ or ‘best’ business operations, managers will attract reputational risk, could potentially fail investment advisor due diligence and will ultimately lose in a highly competitive sector
  • Managers will be in the position to promote sound business operations as a key differentiator, providing assurance for institutional investors. This will allow managers to ‘tick that box’ and focus on their core business
  • Following the FCA’s recent Asset Management Market Study, institutional investors are likely to demand greater scrutiny on how managers will deliver investment performance while being above minimum operational standards in the best interests of the investor

Key challenges for investment managers

Alpha is assisting its clients in addressing concerns to:

  • Ensure business risk does not undermine the manager’s client proposition
  • Offer credible assurance to third parties that the manager is addressing business risk
  • Identify areas of improvement across the internal value chain, front, middle and back office
  • Implement and execute sensible actions to address due diligence issues
  • Ensure the changes are sustainable

How can Alpha help?

Alpha has developed a business due diligence assessment method to determine:

  • How a manager operates based on the following characteristics:
    • Organisation, Staffing, Assets & Investors, Trade Processes, Portfolio Pricing and NAV Calculations, Cash Collateral & Leverage, Service Providers & Counter Party Risk Management, Compliance Legal & Corporate Governance, I.T. and Business Continuity, Portfolio & Liquidity Risk, Candidate Fund Details and Expenses
  • Recommendations: Key practical actions that can be taken to bridge gaps and address areas of concern
  • Implementation: Support implementation with specific skills or capabilities

We do not treat this as an audit, but rather an engaging way to address issues asset owners or investment advisors may scrutinise during the manager selection process.

“Increasingly institutional investors and asset owners are looking for long-term partnerships with managers. This means ensuring the business is well-run and is sustainable; due diligence is core in selecting the right manager.”


Tej Dosanjh, Alpha Director