Ongoing Direct Investment Sub-Advisory Services
Because of the unique risks and complexities associated with non-liquid investment, conducting ongoing due diligence on these types of assets may quickly prove to be a cumbersome and costly activity. Fortunately, Aliso Advisors is available to serve as an ongoing direct investment sub-advisor.
Aliso Advisors has developed a rigorous due diligence and vetting process. The reduced transparency of these strategies requires an added level of due diligence on these managers’ operations and risk controls. We place significant emphasis on understanding the organizational structure, the back office functions, and the risk monitoring, compliance and trading functions of the firm.
Our tenure as an alternative investment consultant and our significant client assets invested in this space gives us excellent exposure among the top managers/funds/partnerships. This often gives us access to investment managers and strategies which might otherwise be inaccessible to our clients
Our Due Diligence Process
Unlike liquid assets, which are typically managed according to the principles of modern portfolio theory, when managing alternative investments, there is no investment theory on allocation or diversification that can be relied upon. Therefore, Aliso Advisors' approach to sourcing and managing non-liquid investments is based on the collective wisdom of its advisory team.
At Aliso Advisors, when conducting due diligence on a potential alternative investment, we evaluate numerous aspects, such as sponsor experience and track record, deal structure, and general suitability. We also look at how a sponsor would complement our client’s portfolio goals, distribution needs, and other requirements.
The following outlines how Aliso Advisors conducts its due diligence:
Step 1 – Initial Sponsor Review and Contact
Aliso Advisors sends the sponsor a memo in order to introduce ourselves to the sponsor, as well as to let the sponsor better understand our due diligence process, requirements, and expectations.
Step 2 – Initial Evaluation
Upon initial sponsor contact, Aliso Advisors determines in a quick and efficient manner if the investment is appropriate for inclusion. To accomplish this, the candidate sponsor is asked to complete an initial questionnaire. The purpose of the initial questionnaire is to determine if, based upon the sponsor’s representations, this is a sponsor Aliso Advisors should complete a formal due diligence review on. Data is not verified at this time as verification comes later in the process. Based upon the information collected, Aliso Advisors makes a recommendation whether to proceed or decline with due diligence.
Step 3 – Formal Due Diligence and Review of Documents
Aliso Advisors' Due Diligence Checklist is used to assist the Due Diligence Analyst (DDA) in determining what documents and information should be considered for examination during the formal due diligence process. In addition, the DDA reviews the following documents:
Private Placement Memorandum or Offering Circular
Third Party Due Diligence Reports
Sponsor Principal Disclosure and Background Check Authorization
Due Diligence Internal Report Template
In the course of reviewing sponsor and third party documents, the DDA documents any information encountered that should be reviewed in greater detail or requires additional verification. Special attention is paid to anything that may be considered a “red flag” that would alert a prudent person to conduct further inquiry. Red flags might arise from information that is publicly available or information that is discovered during the course of due diligence. All notes and observations are documented in the Due Diligence Internal Report.
Step 4 – On-Site Review
After substantial completion of Step 3, a visit to the offices/facilities of the issuer occurs in order to meet with the sponsor’s management team to discuss the issuer's business plan, knowledge of their industry, competitors and any other relevant areas.
Step 5 – Completion of Internal Due Diligence Report
Upon completion of the due diligence process, the DDA completes the Due Diligence Internal Report by creating a summary memo that highlights the review process, significant findings, etc.
Step 6 – Final Review and Approval/Rejection
Based on the research completed by the DDA, Aliso Advisors may make a recommendation whether or not to sign the sponsor onto the client’s platform.
Step 7 – Periodic Reviews
At least annually, Aliso Advisors conducts a review of each sponsor to ensure that its performance is within expectations and its business strategy is still aligned with investors’ interests.