New York (HedgeCo,Net) – Corgentum Consulting announced the results of a survey that shows investors and operational due diligence analysts under research hedge funds when it comes to background investigations. 37% of those surveyed stated that they do not conduct any sort of detailed background investigations on fund managers. A much larger percentage, 86%, felt that there was is more they should be doing when it comes to background investigations particularly in the area of criminal investigations, litigation searches and tax liens.

“While investors have continued to increased their focus on operational due diligence in hedge funds, there is a sharp disparity when it comes to background investigations. The data suggests that some investors are either not performing these investigations at all, or are attempting to take dangerous shortcuts in this area,” said Jason Scharfman, Managing Partner of Corgentum Consulting.

Of those that do perform background checks, the bulk of those surveyed (84%) outsourced the process in some way to third-parties. However 81% of these same investors, felt that the process suffered from being segmented from other parts of the due diligence process. Following up on that finding, the overwhelming majority of those surveyed (92%) felt that there was a benefit to combining the investigative due diligence and operational due diligence processes. The reasons for this trend included a better ability to determine who to investigate at the hedge fund (79%), enhanced analysis of legal risks (84%), more detailed analysis of reputation risks in context (64%) and an overall more efficient process (87%).

“Investors are increasingly recognizing the benefits of combining the background investigation and operational due diligence process under a model pioneered by Corgentum. With integrated reviews, clients benefit from more comprehensive deep dive due diligence reviews and subsequently can make more informed investment decisions,” Scharfman added.

Additional survey findings include:

• Hedge fund operations personnel are under investigated with only 38% of those surveyed stating that they regularly performed background investigations on both investment and operational personnel
• Confirming earlier Corgentum research findings, only a small percentage (16%) of investors and ODD analysts stated that they perform background investigations on fund directors
• 68% of investors surveyed feel there is more need to perform background checks on emerging hedge fund managers as opposed to more developed managers
• There is a general investor consensus (78%) that background checks have become commoditized

The survey was conducted as part of the Corgentum’s 2014 webinar series. Respondents represent a wide variety of operational due diligence analysts and hedge fund investors, ranging from fund of funds and family offices, to institutional hedge fund investors including pensions, endowments, foundations and insurance companies.