How long does institutional investor due diligence usually take?
Short answer
There is no single number, and I would not promise one to an investor. What I can say is that the first due diligence questionnaire, usually 35 to 70 questions, can take one to two business days to complete. After that a master version makes the next one much faster. The longer wait is building the institutional platform, with audits, administrators and third party reviews.
Why I can't give you one number
I can't tell you a fixed number of weeks or months, because the timeline depends on the investor, the size of the check and how ready you are. I can show you where the time goes. Your part of the process starts with a due diligence questionnaire, and the speed of everything after it depends on how prepared you are.
By institutional investors I mean sovereign wealth funds, endowments, pension funds and insurance investment plans. In my experience they often write checks of 10 to 30 million dollars, and sometimes 50 or 100 million dollars, though sizes vary widely. Large family offices with billions of dollars are treated much the same way, and they often act like institutions.
The first questionnaire eats a full day or two
Before an institution or its consultant goes further, they usually ask you to complete a due diligence questionnaire. It is typically a series of 35 to 70 questions. I have filled out many of them myself.
In this episode I explain what a due diligence questionnaire is and why most of the questions repeat from one investor to the next.
The good news is that most questions are the same. One investor's 50 questions might have only five that differ from someone else's 35 or 65 questions. So every new question you answer goes into a master template.
A master questionnaire shortens every round after the first
When a new investor sends their form, you can offer your master instead. It answers every question they asked, plus more. In my experience, about 95 percent of the time they say sure. Sometimes they need the answers entered into their own database in a clean way, so you still have some re-entry work.
This matters more as the checks get bigger. Multi-family offices and wealth managers usually run a checklist process that is more thorough than a private investor's. Win over one investment committee and they may place 10 or 30 of their clients into your deal.
Here I show why a master questionnaire helps when you raise from wealth managers and multi-family offices who each send a different form.
The slow part is the platform behind the paperwork
Answering questions is the quick part. The slow part is having something real to point to. John, who built a large real estate platform, told me that in his experience institutions will not invest without an institutional platform. He also said you have to pass third party due diligence from firms like Mercer and FactRight.
He said it took him many years to get top ratings on each of those reviews. He had to add an audit, supporting documents, third party advisers and a fund administrator along the way. If you do not have these yet, that is where your real timeline begins.
John explains what he had to build before institutions would invest, and how long it took him to earn top third party ratings.
Summary and key takeaways from this video
So plan in two parts. Once you have a master questionnaire, the form itself is a matter of days. Getting your team, track record and third party providers in place can take far longer. Do not promise an investor a closing date based on a guess. Many sponsors talk to a securities attorney about how to approach their structure and their investors' expectations.
From the Family Office Club stage
One thing I tell capital raisers is that a master due diligence questionnaire helps you even when your checks are small. In my experience, few people raising money $50,000 at a time have one. Those high net worth investors often ask me what else they should be asking, because they do not know what to request next in their diligence. If you have prepared what the institutional investors require, you can hand that over and show them the questions they did not know to ask. It can show investors that you are prepared.
"For example, nobody raising capital $50,000 at a time that I know of has a master due diligence questionnaire, but those investors ask all the time, "What else should I be asking? I don't know what I should be asking next in my due diligence." Well, having what all the institutional investors require would help you at that high net worth level."
From the source
- Institutional due diligence questionnaires typically contain 35 to 70 questions.
- A first-time questionnaire can take one to two business days to complete.
- John said it took him many years to earn top ratings from third party due diligence firms.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: 2 Critical Core Due Diligence Tools - Episode 4, How to Build a $1B Real Estate Platform | John Lettera & Richard C. Wilson, Benefits of Closing Deals Using a Master Due Diligence Questionnaire. Quotes come from the video captions, lightly edited for readability. Figures are the speakers' own estimates and experience.
General education only. Not legal, tax or investment advice.
Talk to a securities attorney to explore options around offering documents, investor eligibility rules and fund structure. Do not use AI to write your own legal agreements.
Where to start
- 1Start a master due diligence questionnaire and save every answer you write.
- 2Block one to two business days for your first full questionnaire.
- 3List the audit, legal, administrator and advisory pieces an institution would expect and mark what you lack.
- 4Consider talking to a securities attorney about your offering and investor type.
- 5Offer your master questionnaire first when a new investor sends their own form.
Follow-up questions
How many questions are in an institutional due diligence questionnaire?
They usually run 35 to 70 questions. Different investors ask different ones, but most overlap. Only a handful are new from one form to the next.
Can I send my own questionnaire instead of filling out theirs?
Often yes. I find about 95 percent of investors are fine with a thorough master that answers all their questions. Some need answers in their own database format.
Do institutions really check third party ratings?
According to John, yes. He said you have to pass the due diligence requirements of third party firms like Mercer and FactRight before institutions will invest.
Related questions
- How do pension funds choose which managers to invest with?Pension funds usually pick managers through a group process.
- How do sovereign wealth funds invest in private deals?Sovereign wealth funds sit among the institutions that write 10, 30, 50 or even 100 million dollar checks at a time.
- How do I get a meeting with a pension fund CIO?A pension fund CIO rarely decides alone.
- What is the difference between institutional and retail capital?Institutional capital comes from organizations that invest on behalf of others, such as pensions, endowments and large managers.
Work through it with the waterfall calculator. See all institutional investors resources.