Due diligence tool puts buy side in box seat

11-Jan-2016

By Darin Tyson-Chan

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A new funds management research tool uses decentralised data to allow assessment of an asset manager’s governance structure.

Diligence Vault has been designed to enable wealth management intermediaries to perform due diligence analysis on any managed fund in the Australian market.

“Currently, for example, if a super fund wants to conduct research on hundreds of funds to be able to narrow it down to the 20 or 30 it would like to deal with, the fund would most likely go to a consultant that in turn runs a database,” Diligence Vault Asia partner Hansi Mehrotra told financialobserver.

“But there are issues with this process: not every consultant has a database, fund managers complain about the process because they get multiple consultants sending them questionnaires, and it’s still very manual in nature.

“What our tool allows super funds, sovereign wealth funds, dealer groups, platforms and family offices - any buy-side party - to do is use a series of questionnaire templates we provide them and send them to fund managers to extract the information needed.

“The fund manager has the ability to accept or decline the questionnaire, but from the fund manager’s point of view it’s fantastic as well because if they fill out the questionnaire, they know exactly where the information is going.

“The information on the questionnaire will only ever be exchanged between the fund manager and, say, the super fund.”

Diligence Vault provides 30 different questionnaire templates covering every asset class, as well as options that cover operational due diligence analysis.

Templates can be adopted as they stand or customised to make information more relevant.

Unlike existing research house services, Diligence Vault does not rate any managed funds in question, but instead allows users to perform their own product analysis and comparisons.

Forthcoming upgrades will allow users to assign weightings to questions they feel are more valuable.

Both parties will keep their own data stemming from the questionnaire.

Fund managers will only be required to fill out the standard information on a particular template once, regardless of how many intermediary organisations ask for their data.

Fees will be charged to both parties, with the fee for buy-side users, such as platforms or super funds, ranging from US$10,000 annually for a basic service to US$50,000 a year for a service that includes additional analytics.

“The question I get asked the most is why would a buy-side organisation pay for this service? Surely they already have a consultant giving them this information,” Mehrotra said.

“Well, the consultant usually gives them the research report but not all of the underlying due diligence.

“This tool allows the buy side to conduct their own due diligence and only engage the relevant experts to give an opinion.”

He said consultants could be hired and fired over time, but the client could still build a history with the information.

“Once they have all the data, anything that is granular - for example, performance or fee ranges - they can actually chart within the system," he said.

“So they can start comparing managers and doing high-level filtering analysis within the system, and then decide who they’d like to conduct onsite visits with.”

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