The degree of due diligence being performed by institutional investors on fund managers has increased to levels not witnessed in the industry before, according to the managing director of a boutique fund manager.
“The due diligence done now has increased enormously. The institutions we deal with like to know what we are invested in and will actually come in to visit the investment room so we can take them through what we do,” Omega Global Investors managing director George Vassos said.
“We show them how we measure liquidity, and they ask how we know something is investment grade. So I think they are a lot more careful with their investments,” he said.
According to Vassos, the increased emphasis on due diligence has been driven by superannuation fund trustees, who are demanding more information from their asset consultants.
“They want to know what their exposure is here and what their exposure is there and what the liquidity of a particular investment is like,” Vassos said.
“They want to see more transparency,” he said.
While this intensified demand on transparency may impact adversely on some fund managers, Vassos said it could actually be advantageous to Omega as it is a boutique fixed income manager.
“That’s what we build our business on. But if I was a hedge fund manager at the extreme – and I’m not knocking them as there are some great hedge fund managers out there – sometimes it’s a little bit more difficult for them to provide all of the information,” he said.
“So it gives us a bit of an inside run when we’re out in the market.”
