Annual 2017 Operational Due Diligence Survey Results

Contact George Evans at to set up a product demo and receive survey. Press release below.

Convergence Annual Institutional Investor ODD – Operational Due Diligence Survey – 2017 Results

FOF’s – Pension Plans – Endowments and Foundations – Have you invested in ODD from a Tools, Technology and Personnel Perspective? Have you created sufficient capacity and bandwidth to manage Operating Risk?
Convergence is pleased to present the annual results of our 2017 survey focused on Operational Due Diligence (ODD) practices and processes concerning investment allocations by institutional investors to alternative assets. Survey participants include a cross section of institutional investors with respect to type of investor, number of investment allocations to external managers and the amount of new annual allocations to external managers.
Survey findings suggest that a number of Institutional Investors rely upon periodic Manager or Consultant communication and loosely defined processes to monitor Operational Risk and Infrastructure changes regularly. Institutional Investors may have limited resources and tools available to proactively fulfill their Fiduciary responsibility in an environment of increasing regulatory scrutiny and operational Complexity.
Selected highlights of the study include:
Given continued regulatory focus and increasing manager operating complexity, investors should refresh their evaluations of the level of resources (staff and/or technology) dedicated to Operational Due Diligence, as well as their own current written policies and documentation requirements from managers. We note that current manager and new manager allocations have increased since our prior study, but dedicated resources (people and technology) have increased only marginally. Tool sets provided by Convergence lend themselves to small to medium-sized ODD teams challenged by capacity and bandwidth.
Investors should consider reviewing their level of focus and current processes for evaluating managers’ assessment and monitoring of service provider relationships, including manager practices of ongoing monitoring of their service providers, particularly for hedge fund manager allocations. Private equity managers will likely continue to increase their level of outsourced service providers, underscoring the need for this review. Service provider “best fit” is a key consideration.
With the considerable increase in new products and new avenues for product distribution by managers, investors should reevaluate those data points, metrics and sources of information for assessing manager operational complexity and risk. Consideration should be given to appropriate weighting of risk areas for “scoring” purposes, and scoring processes should be considered by those not presently doing such as part of their ODD process. Operating Model Complexity and Risk Profiling are paramount to active management of an Advisor.
Investors should consider reviewing and updating their policies, practices and processes for performing ongoing ODD monitoring and surveillance of hedge fund and private equity manager allocations. Consideration should be given to the level of proactive, data-driven processes in place to perform ongoing ODD.
Although 100% of respondents indicate their organization views ODD as a “value adding” activity that can improve returns and manage portfolio risk, we are concerned that this area is one in which investors may slowly continue to build resources, processes and technology. Investors should consider a complete review of dedicated resources for varied aspects of initial ODD and ODD monitoring and make spending decisions consistent with their assessment of risk across their portfolio, recognizing that manager OPERATING risk profiles are in constant change.


Convergence focuses on providing Fund of Funds, Pensions, Endowments and Foundations relevant Advisor data – INDEPENDENT of the Advisor.
Convergence enables its institutional investor clients to increase internal efficiencies, reduce third-party consulting costs and enhance ODD responsibilities through the use of customized technology tools which “push” material events communications to those responsible for ongoing ODD.
Institutional investors have a responsibility to their stakeholders to monitor material events in the private funds industry and those specific to their investment allocations. While the level of focus and resources allocated to ongoing ODD is increasing, current processes are generally (1) reactive in nature, (2) dependent upon requesting information or on periodic updates and (3) likely not all-encompassing, even with respect to specific fund allocations.
Convergence has identified 40 operating complexity factors which it captures and creates, all geared toward enabling investors to assess and measure the business risk profile of manager allocations, including the ability to compare and contrast with industry peers.


This 2017 survey was designed and compiled by Convergence, Inc. along with industry practitioners, including certain representatives of survey participants. Convergence, Inc. is a data and analytics firm providing subscription and research data on Registered Investment Advisor infrastructure, positioning ODD teams to evaluate Operating Model Risk.
Convergence has developed a data, analytics and surveillance platform that provides transparency and easily accessible information relating to the business operations and infrastructure of alternative asset managers. Convergence products include technology-based tools used to facilitate manager and industry research, analytics and surveillance across the universe of registered investment advisors, including assessment of their operating and business risk profile, comparisons to peers and competitors and analyses of their service providers. The company’s platform includes dynamic data and analytics on the entire universe of 16,000+
Registered Investment Advisors, 53,000+ private funds and the industry’s ecosystem of 6,000 service providers. The platform includes 2,000+ data points from regulatory filings and news sources and a significant amount of derived analytics and proprietary original content – most notably Advisor operating model COMPLEXITY PROFILING.
Institutional investors use the company’s products to research advisors and their business complexity and operations-related ecosystem prior to and throughout investment allocation. Convergence products benefit institutional investors focused on employing a dynamic, data-based, ongoing process of manager and advisor surveillance. These products, which are customizable based on an investor’s allocations and data specifications, include Market News, Material ADV filing surveillance, Operating Model Research, Service Provider Best Fit, COMPLEXITY profiling, Fund Expense Practices and Redlining of ADV Part 2 Brochures.
Contact George Evans at (215-704-7100) to set up a product demo and receive survey.