Hedge Fund Investors Cut Corners On Background Investigations, According To Corgentum Consulting's Survey

NEW YORK, Sept. 17, 2014 /PRNewswire/ -- Corgentum Consulting, the leading provider of the industry's most comprehensive hedge fund operational due diligence reviews and background investigations, today announced the results of a survey that shows investors and operational due diligence analysts under research hedge funds when it comes to background investigations. 37% of those surveyed stated that they do not conduct any sort of detailed background investigations on fund managers. A much larger percentage, 86%, felt that there was is more they should be doing when it comes to background investigations particularly in the area of criminal investigations, litigation searches and tax liens.

"While investors have continued to increased their focus on operational due diligence in hedge funds, there is a sharp disparity when it comes to background investigations. The data suggests that some investors are either not performing these investigations at all, or are attempting to take dangerous shortcuts in this area," said Jason Scharfman, Managing Partner of Corgentum Consulting.

Of those that do perform background checks, the bulk of those surveyed (84%) outsourced the process in some way to third-parties. However 81% of these same investors, felt that the process suffered from being segmented from other parts of the due diligence process. Following up on that finding, the overwhelming majority of those surveyed (92%) felt that there was a benefit to combining the investigative due diligence and operational due diligence processes. The reasons for this trend included a better ability to determine who to investigate at the hedge fund (79%), enhanced analysis of legal risks (84%), more detailed analysis of reputation risks in context (64%) and an overall more efficient process (87%).

"Investors are increasingly recognizing the benefits of combining the background investigation and operational due diligence process under a model pioneered by Corgentum. With integrated reviews, clients benefit from more comprehensive deep dive due diligence reviews and subsequently can make more informed investment decisions," Scharfman added.

Additional survey findings include:

• Hedge fund operations personnel are under investigated with only 38% of those surveyed stating that they regularly performed background investigations on both investment and operational personnel
• Confirming earlier Corgentum research findings, only a small percentage (16%) of investors and ODD analysts stated that they perform background investigations on fund directors
• 68% of investors surveyed feel there is more need to perform background checks on emerging hedge fund managers as opposed to more developed managers
• There is a general investor consensus (78%) that background checks have become commoditized 

The survey was conducted as part of the Corgentum's 2014 webinar series. Respondents represent a wide variety of operational due diligence analysts and hedge fund investors, ranging from fund of funds and family offices, to institutional hedge fund investors including pensions, endowments, foundations and insurance companies.

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Notes to Editors

About Corgentum Consulting

Corgentum Consulting is a specialist consulting firm that performs operational due diligence reviews and background investigations of fund managers and directors. The firm works with investors including fund of funds, pensions, endowments, banks and family offices to conduct the industry's most comprehensive operational due diligence reviews. Corgentum's work covers all fund strategies globally including hedge funds, private equity, real estate funds and traditional funds. The firm's sole focus on operational due diligence, veteran experience, and innovative original research allows Corgentum to ensure that the firm's clients avoid unnecessary operational risks. For more information visit www.Corgentum.com

SOURCE Corgentum Consulting