To state the obvious, the Covid-19 novel coronavirus has rapidly become the most serious global public health crisis since the Spanish Flu epidemic of 1918, more than a century ago.
What should investors and asset managers do in such a rapidly changing crisis situation? Clearly, due diligence as usual is not on the agenda. Equally, investors are typically fiduciaries and are often regulated. Putting all diligence on hold is, therefore, not an option – clients, plan members and beneficiaries expect asset owners and advisors to manage risks and protect their interests, especially at a time of crisis.
Castle Hall has moved quickly to provide new sources of information on Covid and build new diligence solutions - including our FREE DiligenceExchange Covid-19 Status Report.
Above all, we’re all in this together: this is a time when everyone in the asset management community can collaborate to share ideas and best practices. Working together, we can help protect our colleagues and their families, and support our businesses across the industry.
The Castle Hall Team.
Castle Hall recommends that investors create a Covid-19 Diligence Plan – a “CDP”. A CDP creates a framework for a risk based, consistent and evidenced process to monitor capital allocated to third party asset managers.
Importantly, if you are a fiduciary or are regulated, diligence should be evidenced and consistent. While phone calls with managers can gather important information, are the results of those calls actually written up, and is data gathered in verbal conversations consistent?
We recommend a five step process:
Download Establishing Your CDP – Covid-19 Diligence Plan White Paper
Investors must gather sufficient, timely Covid-19 information on all external managers in a portfolio, across all asset classes. Completeness of diligence is critical – especially if acting as a fiduciary, investors should gather (and document) baseline information on ALL managers to whom capital is deployed.
To help with risk assessment and initial data gathering, Castle Hall has developed our free DiligenceExchange Covid-19 Status Report. The aim is to create a rapid turnaround document which can be quickly gathered across all managers. This quick response data can then be combined to create a risk heatmap. Questions include:
Please contact Castle Hall to learn more about the DiligenceExchange Status Report and how it can help your diligence group, investment team and executive management.
Given the materiality of Covid-19, investors will wish to conduct deeper dive due diligence on higher risk managers. These will be managers with higher dollar allocations, who are smaller firms with fewer resources, or who operate with strategies which are more exposed to the market impacts of Covid-19. More detailed due diligence will also be necessary as an escalation following the Level 1 Status Report – which managers, if any, have reported significant difficulties in the roll out of their BCP plan in response to Covid-19?
Castle Hall’s Level 2 Covid-19 Diligence Report covers key risk areas:
Contact Castle Hall to learn more about this key diligence tool as investors evaluate their key manager relationships.
Use DiligenceExpress and DiligenceHub to establish a baseline of diligence information across all asset managers and monitor critical updates.
Explore the Manager Form ADV Filing to:
Access the Fund Form ADV Filing to:
We recommend that you follow all US SEC Registered managers and any fund filings to receive notifications of amendments to these regulatory filings.
Leverage DiligenceHub Analytics to save time and focus your efforts by quickly scanning for key features across your portfolio.
Castle Hall's Reputational Diligence service expands upon DiligenceExpress free monitoring of regulatory filings to incorporate streamlined and efficient daily media, sanctions and watchlist monitoring. Contact us for more information on this cost-effective and time-saving solution to rounding out your Covid-19 Diligence Program.
Watch this video for an overview of how DiligenceExpress can be used to review and monitor regulatory filing information as part of your overall diligence and risk management activities.
OpsReview is Castle Hall’s flagship onsite due diligence process, delivering a comprehensive diligence assessment of each manager and fund. OpsReview provides detailed due diligence coverage for material manager allocations, higher risk managers and more complex asset classes.
Due diligence is no longer "just" about ODD. Leveraging our decade plus experience and the DiligenceHub tech platform, Castle Hall helps our clients expand their oversight of external managers beyond traditional operational metrics.
CyberSecurityDiligence - expanded due diligence as asset manager cybersecurity policies and procedures.
ESGDiligence - considering ESG risks at the management company and strategy level.
RiskDiligence - review of risk management procedures and analysis of risk controls.
Total Diligence provides enriched oversight across each manager and fund in a portfolio.