Course Registration

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Welcome, Introductions and Class Overview

• Introduction of facilitator and background
• Class structure and expectations

Module 1 - Function & Preparation

• What is Operational Due Diligence?
• Approach Determined By Asset Class
• Similarities: Liquid vs. Illiquid (Manager)
• Differences: Liquid vs. Illiquid (Manager)
• Differences: Liquid vs. Illiquid (Fund)
• The Manager: Main Areas Covered

Module 2 - Manager Documentation

• Documents to Request In Advance
• Documents to Request In Advance cont’d
• Documents to Review Onsite

Module 3 - About the Firm

• Firm (Manager/General) Partnership
• Firm History
• Firm Governance
• Firm Organizational Structure

Module 4 - Fund Documentation & Terms Documentation

• Terms: LPA and/or Offering Docs
• Terms: LPA and/or Offering Docs Cont’d
• Timelines to Fund Launch and Close
• Capital Call Risks
• Ability to Exit the Fund (Potential Liquidity)

Module 5 - Fund Fees, Expenses

• Fees and Expenses
• What is acceptable
• Management Fees & Offsets
• Step-downs
• Mechanism
• Fees Collected

Module 6 - Carried Interest & Waterfalls

• Carried Interest (i.e., Performance fee)
• Carry Calculation Example
• Waterfall
• Waterfall Calculation

Module 7 - Investment Process

• Investment Process Overview
• Investment Process Cont’d
• Investment and Counterparty Risk
• Investment Allocations (i.e., Policy)
• Co-Investments and JVs

Module 8 - Compliance & Regulation

• Compliance
• Conflicts of Interest –Manager Level, Fund Level
• Registration Required
• Federal Regulation
• Registration Exemption
• Regulatory Documents

Module 9 - Audit & Reporting

• Fund Audit Report
• Fund Audited Financial Statements (AFS)
• Financial Accounting Standards Board (FASB)
• Level 1
• Level 3
• Operational Audit Risk
• Global Investment Performance Standards

Module 10 - Back Office & Fund Accounting

• Structure and function
• Who reports to whom?
• Systems
• Assessing team quality
• Fee calculations
• In-house accounting vs Third Party

Module 11 - Administration & Cash Controls

• Experience?
• Bookkeeper or administrator
• Reporting
• Capital calls, distributions, fees and expenses
• Callbacks
• Reconciliation
• Procedure vs Control
• Custody

Module 12 - Valuation

• Valuation Review
• Valuation process
• Questions to ask
• Valuation best practices
• Approaches to valuing portfolio companies

Module 13 - Third-Party Service Providers

• Potential Service Providers to the Manager
• Service Providers to the Fund
• Service Provider Considerations
• Oversight
• Experience
• Track record
• Source of Risk

Module 14 - IT, Cyber Security, Disaster Recovery & Business Continuity

• Information Technology (IT)
• Internal vs Outsourced
• Cyber Security
• Governance
• Insurance
• Disaster Recovery (DR) and Business Continuity Plans (BCP)
• Testing

Module 15 - ODD Report Scope - What Should an ODD Report Include?

• Strengths and weaknesses?
• Level of detail?
• Note-taking
• Ratings
• Individual areas or simply as a whole?
• The Manager
• The Fund

Desk-Ready Skills

• Identify relevant materials needed to prepare for Operational Due Diligence.
• Review and prepare materials for Operational Due Diligence.
• Synthesize obtained materials and create agenda for Due Diligence Review.
• Identify exceptions or areas to review to be included for review.
• Evaluate key operational processes of the fund.
• Evaluate key components of the investment management firm.
• Evaluate human capital of the fund.
• Evaluate third party service providers of the fund.
• Evaluate counterparties affiliated with the fund.
• Evaluate compliance program and the regulatory environment.
• Evaluate the fund vehicle structure and terms.
• Evaluate the fund technology infrastructure.
• Synthesize findings and make operational recommendations.
• Identify deficiencies and develop mitigation plan.
• Develop monitoring plan including scope, frequency, and technique.

Recommended for:

• Investment professionals from asset managers, such as pension funds, endowments, family offices, insurance companies, sovereign wealth funds, investment and development banks
• Private Equity fund professionals interested in gaining a thorough understanding of the institutional investor’s perspective
• Policy makers and government officials who are responsible for regulating the financial sector
• Advisors working with private equity fund clients, including accountants, lawyers, bankers, consultants and financial advisors

Participants should have an understanding of Private Equity Due Diligence at the fundamentals level before taking this Master level course, including:

• • A deep and thorough background in the financial markets and securities
  • A complete understanding of financial products including; hedge funds, private equity and separate account platforms
  • Strong knowledge and experience working with financial statements
  • Knowledge and understanding of investment strategies