Private investment due diligence is one of the most challenging, but critical aspects to a successful investment strategy. As an investor, it's important to asses not only the GP's competitive advantage, but to also to compare the strategy to your existing manager relationships to gauge how complementary and/or additive the opportunity is to your other investments. Please see some preliminary questions to ask below as you begin your process:
Team
Who is on the leadership team?
Who owns the management company?
Who are the full-time professionals (investors, operators, administrators)?
Who are the part-time professionals (advisors, executive network)?
How is everyone compensated?
What is everyone’s prior work history together?
How are the team members’ skill sets complementary to one another?
What outstanding hiring needs remain?
Where is everyone based?
Have there been any key departures?
Process
How do you source investments?
Who sources investments?
How many investments have you sourced in the last year?
How do you determine which investments to advance?
How many investment opportunities are discussed at Investment Committee each month?
On average, how many times are investments discussed at Investment Committee before making investment decisions?
Who is on your Investment Committee?
How does the Investment Committee make investment decisions?
Does anyone on your team have veto rights on investment decisions?
What are examples of opportunities you have passed on? Missed?
Experience
How much capital have you managed previously?
How many investments have you managed previously?
Over what time period and at what organization(s) did you invest previously?
How does the prior investment activity differ from and/or relate to the proposed investment strategy?
Do you have attribution on your prior investment activity?
Who can provide references to attest to your prior investments?
Which deal is most representative of your go-forward investment strategy?
Which prior investment represents your biggest lesson learned?
Are there parts of your track record you have omitted?
How would you rate your track record?
Strategy
What is your investment asset class?
What sector(s) do you invest in?
What is your targeted investment geography?
What is your fund size?
What is your targeted equity commitments per investment?
What is the fund’s targeted number of investments?
What is the fund’s targeted ownership percentage per investment?
What is your expected loss ratio?
What are your underwriting targets?
How do you intend to achieve your underwriting targets?