Monel Amin Founder of DiligenceVault. Former head of liquid investments risk @ Citi, CMU/Tepper and BVM Engineering alumna

The Partnership.com of Due Diligence

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In our recent blog we discussed the widely adopted pre-investment initial due diligence construct in the industry, and how due diligence is like dating. In today’s post, we will investigate the post-investment ongoing monitoring due diligence.

Although investors and asset managers spend significant amount of energy on initial due diligence, at times ongoing monitoring may take a back seat once the euphoria and adrenaline of making an investment is over.

However, the crucial aspects to investment success lie within the governance around ongoing monitoring - which provides invaluable insights into how investment decisions are determined and how the portfolios are managed and ultimately leading to long-term partnerships between asset managers and investors. The current monitoring process involves using databases for performance monitoring, reading manager reports and communication to get periodic updates, and polling managers on an ad-hoc basis for updates on business and investment framework.

At DiligenceVault, we have created a solution that complements the functionalities of databases. DV offers a solution to both the asset managers and investors by providing data, documents, and insights that are not available in databases. Additionally, by connecting the two sides, the platform offers a centralized monitoring system across multiple asset classes and fund structures.

THE 80% CASE

The majority of investors have some form of ongoing monitoring process where data and document collection on a periodic basis represent the basis of oversight. Often, these requests tend to stay static with changes made over time only to reflect changing teams, markets, and regulations, etc. To address these periodic requests, asset managers spend hours manually copying and pasting a multitude of information for the same investor client, and also across their entire investor base. That’s a lot of CTL+C and CTL+V! In addition, tracking changes between documents without a centralized baseline can become manually intensive.

DiligenceVault Functionality

DiligenceVault offers smart auto-fill for managers across time periods and across products, as well as an NLP recommendation engine to find similar answers across different investors. This results in faster time-to-data for investors and reduced cost of client servicing for asset managers; which equates to a happier investor-manager relationship.

THE 20% CASE

In a scenario where a stressed event is experienced in a market segment, industry, region, or global environment, the investors would tend to send ad-hoc questions to their asset managers to better understand and assess their risks and exposures. Let’s take an example of a pandemic survey that most investors executed in March - April of 2020. Under this scenario, everyone at the firm is stressed. Everyone is looking for an update. The majority of the burden resulting from this exercise is when either investors have to manually pull information or when managers have to manually fill out investor questionnaires.

Before DV (left) and After DV (right)

DiligenceVault is a sustainable response to the digitization of due diligence processes and the platform helps all users during these stressful scenarios.

DV offers a two-sided ecosystem with over 16,000 users that is trusted by both asset managers and their investors. The biggest benefit of the DV ecosystem is that both sides are familiar with the platform, they both trust it, and DV is embedded in their workflow.

In the current environment, where travel is limited, and times are less than certain, digital and virtual due diligence can make a huge difference in mitigating anxiety and abiding by fiduciary responsibilities. DiligenceVault empowers and facilitates remote collaboration among teams, and simplifies the due diligence process through digitization.

Regardless of which cohort of industry participants you represent, the challenge of analog diligence is omni-present in the form of manually intensive exchange of information, bilateral processes, copy and paste marathons, and lengthy email chains.

So, going back to the dating and partnership analogy, the less friction in the interaction of the data exchange, the more effective the entire experience. Just think of the challenges of long-distance relationships! There are time zone considerations, physical distance, missing context, and competing priorities. The same applies here to due diligence when there are very real time zone barriers, travel bans, and shifting markets.

Whether it's initial diligence or ongoing monitoring - a platform that digitizes and centralizes this information exchange, leverages advanced AI to create a repository which can be repurposed, and provides process automation that everyone needs has become a necessity, and we are excited to be leading the charge!

Part 1: Link here

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