LOS b: Explain and justify the major due diligence checkpoints involved in selecting active managers of alternative investments.

Q1. Which of the following is least likely to be a due diligence checkpoint in the selection process of active managers of alternative investments?

A)   The geographic location of the office with respect to the geographic locations in which the manager invests.

B)   The service providers like lawyers and ancillary staff working for the manager’s firm.

C)   Market opportunity the manager seeks to exploit.

Q2. In the due diligence process of selecting an active manager of alternative investments, “assessing the investment process” means assessing the:

A)   competitive edge the manager offers.

B)   stability of the organization and employee turnover.

C)   special assets the manager offers.

Q3. In the due diligence process of selecting an active manager of alternative investments, “assessing the organization of the manager’s firm” means assessing the:

A)   terms and structure of the investments the manager offers.

B)   documents (e.g., prospectuses of the investments the manager offers).

C)   stability of the firm and staff turnover.

LOS b: Explain and justify the major due diligence checkpoints involved in selecting active managers of alternative investments. fficeffice" />

Q1. Which of the following is least likely to be a due diligence checkpoint in the selection process of active managers of alternative investments?

A)   The geographic location of the office with respect to the geographic locations in which the manager invests.

B)   The service providers like lawyers and ancillary staff working for the manager’s firm.

C)   Market opportunity the manager seeks to exploit.

Correct answer is A)

The due diligence checkpoint list does not mention the geographic location of the offices.

Q2. In the due diligence process of selecting an active manager of alternative investments, “assessing the investment process” means assessing the:

A)   competitive edge the manager offers.

B)   stability of the organization and employee turnover.

C)   special assets the manager offers.

Correct answer is A)

In the due diligence checkpoints, “assessing the investment process” means assessing the competitive edge the manager offers. The special assets are associated with the “market opportunity” checkpoint. The stability of the organization and employee turnover is associated with the “organization” checkpoint.

Q3. In the due diligence process of selecting an active manager of alternative investments, “assessing the organization of the manager’s firm” means assessing the:

A)   terms and structure of the investments the manager offers.

B)   documents (e.g., prospectuses of the investments the manager offers).

C)   stability of the firm and staff turnover.

Correct answer is C)

Assessing the organization of the manager and his/her operations means assessing whether it is stable and well run. This would also mean measuring the staff turnover.

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