Hedge fund managers and investors sometimes view the same topic very differently.  See, e.g., “Ernst & Young’s Sixth Annual Global Hedge Fund Survey Highlights Continued Divergence of Expectations between Managers and Investors,” Hedge Fund Law Report, Vol. 5, No. 44 (Nov. 21, 2012).  The all-important topic of hedge fund due diligence is no exception to this industry truism.  This divergence of interests, experience and expectations was in evidence at a recent conference entitled “Hedge Fund Due Diligence Master Class,” and hosted by Financial Research Associates LLC (FRA).  But, equally if not more importantly, the FRA event also highlighted areas of shared concern among managers and investors, as well as specific due diligence techniques that benefit both constituencies.  Hedge fund due diligence has become a condition precedent of the initiation and continuation of a relationship between a manager and investor.  It is front and center in terms of importance.  Therefore, the concerns, best practices, due diligence approaches and stories from the trenches shared at the FRA event hold important lessons for investors as well as managers.  The Hedge Fund Law Report is memorializing the key lessons from the event in a two-part series of articles.  This article, the first in the series, addresses key priorities and red flags that investors should look for during the manager diligence process; the tension between increased portfolio transparency and protection of proprietary information; and investor perspectives on enterprise risk management by managers.  The second installment will discuss custody and valuation issues; strategic planning for sustainable due diligence programs; recent regulatory developments and how managers should respond; questions that investors should ask during diligence; and ways in which managers are improving their due diligence processes.