Due Diligence Questions and Answers
102 questions on due diligence answered by Richard C. Wilson. How family offices check deals, funds, sponsors and partners before they invest, and the red flags to watch for.
Start here: the sponsor and GP due diligence checklist and the top 25 due diligence questions.
All 102 Questions
- What evidence should a family office require before committing capital to a fund?
- How can an investor verify a fund's reported track record?
- How should past performance be adjusted for changes in a manager's team or strategy?
- What questions reveal whether a manager's investment process is repeatable?
- How can a family office tell whether returns came from skill or market conditions?
- What should an investor examine in a fund's audited financial statements?
- How can investors check that a fund's assets and valuations are real?
- What valuation methods should a fund use for illiquid holdings?
- How should an investor assess the independence of a fund's auditor?
- What signs of weak financial controls should investors look for?
- How can a family office verify that a fund's stated assets under management are accurate?
- What should an investor learn from a fund's cash flow history?
- How can investors test whether a fund's returns are net of all fees and expenses?
- What records should support a manager's claimed investment results?
- How should investors investigate a fund that has changed administrators?
- What should an investor ask about a fund's side letters?
- How can investors compare the terms offered to different fund investors?
- Which provisions in a limited partnership agreement deserve the closest review?
- How should an investor assess a fund's redemption and withdrawal restrictions?
- What happens to an investor's capital if a fund suspends redemptions?
- How should a family office evaluate a fund's use of borrowing?
- What borrowing terms could put a fund's assets at risk?
- How can investors identify conflicts between a manager's personal interests and the fund?
- What disclosures should investors expect about related-party transactions?
- How should a family office assess a manager's personal investment alongside fund investors?
- What questions can uncover undisclosed compensation or referral arrangements?
- How should investors examine a fund's expense allocation policy?
- Which fund expenses should be paid by the manager instead of investors?
- How can a family office assess whether a fund's fee structure is fair?
- What should investors ask about carried interest and clawback protections?
- How can an investor verify that a manager has invested the amount claimed?
- What evidence shows that a fund's key employees are committed for the long term?
- How should investors evaluate turnover among a manager's senior team?
- What happens to a fund if its lead investor or portfolio manager leaves?
- How can investors assess the depth of a manager's successor bench?
- What references should a family office request before hiring an investment manager?
- How should an investor conduct reference checks beyond the manager's chosen contacts?
- What questions should investors ask former employees of a fund manager?
- How can a family office assess whether a manager responds candidly to difficult questions?
- What background checks are appropriate for a fund's principals and key staff?
- How should investors investigate a manager's prior lawsuits or regulatory actions?
- What should an investor ask about unresolved disputes with former clients or partners?
- How can a family office verify a manager's professional qualifications?
- What warning signs suggest a fund's marketing claims are misleading?
- How should investors handle gaps or inconsistencies in a manager's disclosures?
- What documents should be reviewed before signing a subscription agreement?
- Which representations in an investment agreement should be independently checked?
- What investor protections should be negotiated before funding a private investment?
- How should a family office assess the enforceability of a fund's governing documents?
- What legal risks can arise when investing through an offshore structure?
- How should investors evaluate a fund's tax reporting process?
- What should a family office ask about a manager's compliance program?
- How can investors assess whether a fund follows its stated investment restrictions?
- What compliance records should a manager be willing to provide?
- How should a family office review a fund's anti-money-laundering procedures?
- What controls should prevent unauthorized trades or transfers?
- How can an investor test the security of a manager's payment instructions?
- What steps help prevent wire fraud during an investment closing?
- How should investors evaluate a fund's data security and incident response?
- What should a family office learn about a manager's business continuity plan?
- How can investors assess a fund's exposure to key vendors or service providers?
- What happens to fund operations if its administrator or custodian fails?
- How should a family office assess custody arrangements for a private fund?
- What evidence confirms that investor cash is held separately from manager assets?
- How can investors check that a portfolio company's financial statements are reliable?
- What should an investor inspect before buying a stake in a private company?
- How can a family office verify a private company's customer concentration?
- What diligence can reveal whether a company's revenue is recurring?
- How should investors test a company's working capital and cash needs?
- What should an investor ask about a company's debt covenants?
- How can a family office uncover liabilities that are missing from a company's accounts?
- What environmental risks should be investigated before acquiring a property?
- How should an investor assess title, permits, and zoning for a real estate deal?
- What property inspection findings should stop an acquisition?
- How can investors verify a real estate sponsor's claimed project costs?
- What should a family office check in a property's rent roll and lease agreements?
- How should investors assess a development project's construction budget and timeline?
- What assumptions in a property's forecast deserve independent validation?
- How can an investor assess whether an acquisition price is supported by comparable sales?
- What diligence should be completed before investing in a private credit deal?
- How can a family office test whether a borrower can repay a loan?
- What collateral checks matter before making a private loan?
- How should investors evaluate loan covenants and default remedies?
- What should a family office examine in a private equity firm's portfolio company reports?
- How can investors verify a startup's customer traction and product claims?
- What diligence helps identify a startup's intellectual property ownership risks?
- How should an investor assess a company's dependence on its founder?
- What should be checked before investing alongside a sponsor in a co-investment?
- How can a family office evaluate a deal's exit assumptions?
- What is a sensible diligence budget for a direct investment?
- How should a family office prioritize diligence when time is limited?
- Which diligence work should be handled by independent specialists?
- How can an investor tell when a diligence provider has a conflict of interest?
- What should a family office include in a written diligence plan?
- How can an investment team keep diligence findings organized and searchable?
- What process ensures that unresolved diligence issues reach the decision makers?
- How should a family office document the reasons for approving or rejecting an investment?
- When should new information trigger a pause in investment approval?
- How can an investor conduct diligence without signaling a commitment?
- What information should a family office share with a prospective manager during diligence?
- What should a sponsor or GP due diligence checklist include?
- What are the top 25 due diligence questions to ask before investing?