Alternative Investment Awards 2016 21 Best Alternative Investment Diligence Platform: DiligenceProfessional TM & Best Global Due Diligence Firm 2016 Castle Hall Alternatives, a member of AIMA, is a leading specialist in operational due diligence of alternative and traditional asset managers. Company: Castle Hall Alternatives Website: With a team of more than 50, Castle Hall helps investors around the world build comprehensive due diligence programs across hedge fund, private equity, infrastructure, real estate and long only portfolios. Built upon Castle Hall’s next generation, online diligence architecture, DiligenceProfessional helps institutions, fund of funds, advisors, endow- ments, foundations, sovereign wealth funds, pension plans and family offices evaluate whether asset managers meet operational best practice. Having just celebrated its 10-year anniversary, Castle Hall Alternatives is proud to have been named the Best Global Operational Due Diligence Firm for three consecutive years. Operational Due Diligence is Evolving As the alternative asset industry has grown and matured, the discipline of operational due diligence (“ODD”) has become more prominent. Al- ternative asset investors no longer make decisions based on investment performance alone: allocators are equally focused on the risk of opera- tional failure—be it through honest error or, in the worst case, through dishonesty and fraud. Investors also recognize that weak business infrastructure creates an unavoidable drag on performance. An asset manager with weak controls will not have the data, technology, and operational efficiency to ensure optimal implementation of the investment strategy. Against this background, ODD, often an optional luxury before 2008, has become a mandatory component of alternative asset investing. Hedge funds and PE managers are no longer “different”, and institu- tional investors, often subject to fiduciary obligations, cannot accept lower operational standards simply because they are allocating to an alternative manager. As a result, it is becoming a baseline assumption that an alternative asset manager will match the operating standards and mitigate business risks in the same way as established, long-only money managers. ODD is the tool deployed by investors to ensure that alternative investment managers meet these evolving and more demanding requirements. Against this backdrop, Castle Hall sees the emergence of a new para- digm in ODD, which they call Due Diligence 3.0. What is Due Diligence 3.0? Due Diligence 1.0: Pre Madoff. Before 2008, operational due diligence was an optional, “nice to have”. For those investors who did conduct ODD, the process, scope and methodology of emerging ODD programs was very variable. Equally, there was a lack of commonality among hedge fund operating structures, exemplified by the existence of many self-administered funds. Due Diligence 2.0: Post 2008. In the Diligence 2.0 world, some level of hedge fund operational due diligence is now performed by virtually all asset owners. Diligence scope and methodology has also become somewhat more standardized, although some investors continue to have a “light touch”. Due Diligence 3.0 is a new model: Responding to an ever more so- phisticated Governance, Risk and Compliance environment, ODD must now address four emerging themes and challenges for institutional and private investors. 1. MULTI ASSET CLASS Operational diligence should be applied across all third party asset manager relationships, not just hedge funds. Investors focused on governance, risk and compliance now require consistent operational risk information across all fund and account holdings, irrespective of asset class. 2. A RISK-BASED APPROACH Operational risks for mutual funds, long only managed accounts, private equity funds and real estate investments are very different as compared to a traditional hedge fund. Different diligence procedures should be adopted to reflect different asset classes. AI16038