What Evidence Should a Family Office Require Before Committing Capital to a Fund?

Before committing to a fund, I want evidence to test the manager's claims, the risk of losing capital, and the fund's ability to operate as described. Base the review on the documents you receive and the claims they support. A referral or polished presentation can open a conversation, but it cannot establish that the fund fits your needs.

Match Each Claim to Evidence

Start with a short list of material claims, including strategy, results, assets, team, and controls. Record what evidence would support each claim and what is missing. Request the fund's offering materials, governing agreement, subscription documents, organizational chart, audited financial statements, sample investor reports, valuation policy, and compliance materials. Ask who prepared each record, which period it covers, and whether it applies to this fund or a prior vehicle.

For performance claims, request the full investment schedule, including losses and unrealized positions, and identify source records for the figures. Reconcile manager reports with administrator statements and audited accounts where available. This page covers evidence across a fund review. For details on performance records, see records that should support claimed investment results.

Test the Fund's Ability to Withstand a Bad Case

Ask the manager to show how the fund could lose most or all of its capital. Review holdings, borrowing, liquidity limits, concentration, unfunded commitments, and possible capital calls. Ask what funding the portfolio may need if exits are delayed or expected proceeds do not arrive. Request debt documents, a schedule of guarantees and liens, and a cash forecast when applicable. Reconcile material cash movements to bank or custodian statements and ask the manager to explain any gap.

Request a downside case with stated assumptions. Ask what happens if revenue, asset values, or distributions fall below plan, and which assumptions could leave the fund unable to meet obligations. A forecast alone is not evidence. Ask for operating data, contracts, financing terms, or other source material behind its inputs. If an answer depends on a future sale, assess whether the fund can continue without it.

Check Who Controls the Money and Decisions

Establish which entity receives subscriptions, holds assets, approves transfers, calculates valuations, and sends investor reports. Request fund and management company entity records, account control descriptions, administrator and custodian agreements, plus reconciliation examples. Ask how payments are approved, errors are reported, and wire instructions can be changed. Independently call a known contact to confirm payment instructions before sending funds.

Map decision rights in the governing documents. Ask how conflicts and related-party transactions are disclosed, who can approve them, and what reporting investors receive. Identify protections available if the manager departs, breaches a stated restriction, or fails to report material information. Talk with your attorney about legal terms and your CPA about tax reporting. For fund-specific restrictions, see how to assess whether a fund follows its stated investment restrictions.

Ask Directly and Record What Remains Open

Keep questions concrete and compare answers with the documents. For example:

• "Which records support each return and asset figure in the presentation?"
• "What is the most realistic way investors could lose most or all of their capital?"
• "What funding would the portfolio need if exits are delayed?"
• "Who can move fund cash, and how is each transfer approved?"
• "Which conflicts or related-party arrangements affect this fund?"
• "What information are you unable to provide, and why?"

Refusal to support a material claim, unexplained differences between records, or pressure to wire before open questions are resolved deserves attention. A gap is a reason to investigate. Misrepresentation or refusal to identify who controls the fund may require stopping the review. Record the evidence received, unresolved items, who owns them, and the consequences for the decision.

Checklist

• List each important claim and its supporting record.
• Review full results, including losses and unrealized holdings.
• Request governing documents and audit records.
• Review investor reports and control descriptions.
• Test capital needs and a realistic downside scenario.
• Confirm fund entities, account controls, and payment procedures.
• Document open questions and resolve material gaps before funding.

Go deeper: What documents should be reviewed before signing a subscription agreement?.

In my experience, investors are looking for clues consciously or subconsciously that serve as evidence of a very long-term mindset or more of a short-term, shortcut-type bias.

Sources: Capital Raising, Family Office Club investor due diligence framework, The Single Family Office. Informational only, not financial, legal or tax advice.