Work through these in your video — you do not need every single question, but the more of each category you cover, the less an allocator has to ask on a first call.
The ten questions that decide
- Why will this strategy outperform over the next five years?
- What is your sustainable competitive advantage?
- How much of your own money is invested?
- What is the worst-case downside?
- What is the maximum capacity of the strategy?
- What are the key risks to performance?
- How liquid is the portfolio?
- How are you aligned with investors?
- Why should we trust this team?
- What could cause us to lose money?
01
Fund Strategy & Investment Process
- What is the investment strategy?
- What market inefficiency are you exploiting?
- What is your edge versus competitors?
- What asset classes do you invest in?
- What is the target return?
- What is the expected volatility?
- What are the sources of alpha?
- Is the strategy scalable?
- What market conditions favor or hurt performance?
- How has the strategy evolved over time?
02
Performance & Track Record
- What is the historical performance?
- What is the annualized return?
- What is the Sharpe Ratio?
- What is the maximum drawdown?
- How did the fund perform during market crises?
- How much of the return came from market beta versus alpha?
- Can you provide audited performance?
- How does performance compare with benchmarks and peers?
03
Portfolio Construction
- How many positions are typically held?
- What are the concentration limits?
- What is the average holding period?
- What sectors, countries, or themes dominate the portfolio?
- What is the portfolio turnover?
- How is position sizing determined?
- What are the liquidity characteristics of holdings?
04
Risk Management
- How do you manage risk?
- What are the biggest risks in the strategy?
- What risk systems do you use?
- What are your stop-loss policies?
- How do you manage counterparty risk?
- How do you stress test the portfolio?
- What is your worst-case scenario?
- What happened during previous periods of market stress?
05
Team & Organization
- Who are the key decision makers?
- What are their backgrounds?
- How long have they worked together?
- What happens if a key person leaves?
- How is the investment team compensated?
- How much capital have the principals invested in the fund?
- What is the succession plan?
06
Operational Due Diligence
- Who is the fund administrator?
- Who is the auditor?
- Who is the custodian?
- Who provides legal services?
- What controls are in place?
- How are valuations performed?
- Have there been any compliance breaches?
- Have you experienced operational failures?
07
Fund Structure
- What is the legal structure?
- Where is the fund domiciled?
- What are the subscription and redemption terms?
- Are there lock-ups?
- Are there gates?
- What notice period is required?
- What is the minimum investment?
08
Fees & Economics
- What is the management fee?
- What is the performance fee?
- Is there a hurdle rate?
- Is there a high-water mark?
- Are there any hidden expenses?
- What percentage of revenues goes toward operations?
09
Assets Under Management (AUM)
- What is the current AUM?
- What is the target AUM?
- What is the strategy capacity?
- At what AUM would returns begin to deteriorate?
- How quickly are assets growing?
10
Investor Base
- Who are your existing investors?
- What percentage is institutional?
- What percentage is founder capital?
- What is investor concentration?
- Do any investors have preferential terms?
11
ESG & Responsible Investing
Increasingly important to institutional allocators.
- Do you integrate ESG factors?
- Do you have exclusion lists?
- How do you measure sustainability impact?
- Are you compliant with relevant ESG regulations?
12
Regulatory & Compliance
- Which regulator oversees the fund?
- Are you registered with the FCA, SEC, MAS, etc.?
- Have there been any regulatory actions?
- How is AML/KYC handled?
13
Family Office / HNWI-Specific Questions
Family offices and high-net-worth individuals tend to ask more practical, personal questions.
- How do I access my money if needed?
- What is the worst loss investors have experienced?
- How much of your own money is invested?
- Why should I invest with you instead of a passive ETF?
- What keeps you awake at night?
- How often will I receive reporting?
- Can I meet the portfolio manager regularly?
- What tax reporting will be provided?
14
Arbitrage Fund-Specific Questions
If your strategy is arbitrage or relative value, expect these on top of the above.
- What exactly is the arbitrage opportunity?
- Is the return dependent on market direction?
- What happens if volatility collapses?
- How do you source trades?
- How much leverage is used?
- What is the average trade duration?
- How liquid are the positions?
- What is the capacity of the strategy?
- Have arbitrage spreads compressed recently?
- What is the downside risk during market dislocations?