Who we are
Inventum Capital Corp is an independent provider in hedge fund due diligence. We provide a broad range of due diligence solutions, including but not limited to comprehensive due diligence and research runs deep to inspect all the aspects of a manager’s business to maintain you with a complete picture.
We assess how each particular strategy of a hedge fund matches client requirements, acknowledging that no investment case is the same, thanks to our vast expertise in portfolio
We provide ongoing monitoring of a manager’s activity and evaluate counterparty risks.
We use a wide range of due diligence methods to enhance our knowledge of the manager’s business and we provide our clients with complete reports on our findings
What we do
Criteria for selection
- Define measurement criteria
- Fund’s selection
- The market opportunity
- The strategy
- The sponsoring organization and its team
- The track record
- Investment terms and fund’s terms
- Risks to consider
- Service providers
- Conference calls, office visits
- Site visits
- Conducting interviews
- Confirming information with third parties
- Reviewing legal documents
- Assessing the internal control structure
- Conducting due diligence on the administrator
- Ongoing risk management
- Initial review revalidation
- Counterparty Risk
Criteria should be defined in both quantitative and qualitative metrics. The criteria that one can use to measure hedge funds should include:
The main objective to consider is whether a hedge fund meets most, if not all, of the criteria set forth in the search.
Once the criteria are clearly defined, there are a variety of databases that contain thousands of hedge fund names and performance data. Such databases include HFR, Hedgefund.net, Morningstar, and CS/Tremont.
The number of hedge funds under consideration can be efficiently reduced using comparative analysis and individual criteria by our approaches.
- The aim of this analysis of hedge fund and hedge fund strategies is to understand how managers make or destroy value.
- Inventum Capital has developed a multi-factor performance and persistence analysis model and used it over several time periods.
- Finally, we developed new efficient frontier measures, which not only include returns and volatility, but also skewness and kurtosis in order to determine whether hedge funds are really beneficial to investors.
We conduct a kickoff meeting with company management. In a merger, acquisition or investment scenario, we meet with the target company management in order to clarify the due diligence process, the issues that will be addressed, and the meetings and site visits that will need to take place.
We enhance our knowledge of the business issues during these early conversations and in some cases refine the plan based on new information.
We make the initial requests for information that we need to collect.
We conduct interviews and acquire relevant legal information
We identify issues that may need to be brought to your attention and that require further investigation.
Throughout the analysis, we conduct informal presentations and progress reviews with clients. Once all the interviews and site visits have been completed by the due diligence team and all of the accompanying analyses performed, we formalize our finding into our final presentation.
Key aspects of the monitoring process include:
- reviewing the investment strategy
- testing investment performance for consistency
- maintaining awareness of factors that could indicate potential style drift
- confirming that there has been no material change to the business operations of the fund manager.
The risks that we measure, manage and stress-test are:
- Leverage risk
- Interest rate risk
- Foreign exchange risk
- Credit risk
- Equity market risk
- Basis risk
- Liquidity risk
- Position concentration risk
- Correlation risk
- Volatility risk
- Counterparty risk
- Political risk
- Geographic risk
- Tail risk
- Pricing risks.
Why due diligence
Firms can fail not only as a result of poor investment performance or fraud, but also for non-investment-related reasons, such as poor risk management, weak operations, compliance gaps, and promising too much liquidity to investors.
Our only defense is due diligence – the tremendous amount of research that we should do before deciding to make an investment. It’s the painstaking discipline of investigating every aspect of an opportunity, not only the investment capability of the manager but also the equally important but more mundane operational structure of his organization. If we decide to proceed, we should pursue this due diligence as long as we continue investing with that manager.