Technology is an important adjunct to hedge fund investments and operations, but the human element continues to loom disproportionately large in operational due diligence. Institutional investors review voluminous information in the course of due diligence, and a year-long courtship is not unusual before making an investment. Much of that information is obtained and reviewed remotely, but according to the smart money, an operational due diligence process is not complete without an on-site visit. What can institutional investors glean on-site that they cannot obtain remotely? To answer that question, Hedge Fund Law Report interviewed practitioners working in various phases of the hedge fund investment process. This article – the first in a three-part series – conveys the key findings of our interviews on topics including: general goals of an on-site review; the four core benefits of an on-site review; how to prepare for an on-site visit; the role of background checks and confidentiality agreements; how to structure an on-site visit agenda to maximize productivity; and who should participate in an on-site visit and what materials participants should bring. The second article in this series will address protocol for the on-site visit, and the third article will discuss an investor’s options following the on-site visit. See also “Operational Due Diligence from the Hedge Fund Investor Perspective: Deal Breakers, Liquidity, Valuation, Consultants and On-Site Visits
,” Hedge Fund Law Report, Vol. 7, No. 16 (Apr. 25, 2014).