Process
Managers are entitled to know how a process works before committing time to it. Ours runs in five stages. We aim to decline early where the fit is not there, and to be explicit about which stage a conversation has reached.
Stage one — screening
We review the factsheet, the return series since inception, the description of strategy and capacity, current terms, and the identity of the administrator, auditor and prime broker. This stage is deliberately fast and most conversations end here. The most common reasons are overlap with existing exposures, capacity that does not match our intended size, or a return profile whose attribution is unlikely to survive analysis.
Stage two — investment review
If the screen is passed, we begin substantive work on the strategy. This involves an extended discussion with the portfolio manager, return attribution, analysis of the worst drawdowns, a review of how positions are sized and exited, and an assessment of where the edge comes from and whether it is durable. We will usually ask for a detailed walk-through of two or three specific positions, including at least one that lost money.
We also visit. Meeting a team in their own office tells us things that no call does.
Stage three — operational review
The operational review runs separately and can stop the process independently of the investment view. It covers valuation independence, custody and cash controls, counterparty and financing arrangements, segregation of duties, technology and reconciliation, and a full read of the fund documents and audited accounts. Findings are documented with a clear distinction between issues that are fatal, issues that require mitigation, and issues we simply want to monitor.
Stage four — structuring and terms
With both reviews complete, we determine the vehicle — commingled fund, managed account or fund-of-one — and negotiate terms. This covers fees, liquidity, transparency and reporting obligations, capacity rights for future scaling, and any specific mitigations arising from the operational review. Legal documentation is prepared in parallel.
Stage five — sizing and funding
The final decision is a portfolio decision. We determine the risk budget the strategy should occupy, derive the capital allocation from it, and confirm that the addition does not concentrate the portfolio in a return driver or scenario exposure we already hold. Funding follows the fund's subscription cycle, or account opening in the case of a managed account.
After funding
The relationship does not become passive. We monitor against the guidelines and the thesis that justified the allocation, hold formal reviews on a regular cycle, and re-run the operational review periodically. Redemption decisions are driven primarily by change — in the team, in the strategy, in the capacity, or in our own portfolio needs — rather than by a run of poor performance that remains within the range we underwrote.
Timing
A straightforward commingled fund allocation typically takes several months from first meeting to funding. A managed account structure takes longer because of the documentation and account opening involved. We will tell you at each stage where we are and what remains outstanding.