What is an operational due diligence questionnaire for fund managers?
Short answer
It is the written list of questions an institutional investor sends a fund manager before allocating capital. In my experience it runs 35 to 70 questions and covers your team, track record and how the firm operates. Most managers do better by building one master version and reusing it. Many managers talk to a securities attorney about the final wording.
It is the form an institutional investor sends you before they commit money. I call it a DDQ. Operational due diligence generally looks at how a firm runs day to day, not only at returns. Think team, compliance, controls and the people behind the fund. Every investor words the list a little differently, so treat my notes as a starting point.
Who actually asks for one
That is the norm with pension funds, endowments, insurance plans and wealth platforms. It is also the norm with consultants who guide those investors. In 18 years I have not met an investor worth less than $300 to $500 million who said they require one. Many institutional investors do ask for one.
In this workshop clip I explain why almost nobody has a master questionnaire and how it helps you disclose more.
Summary and key takeaways from this video
Why I keep one master copy
Filling one out from scratch is slow. I have done it many times. In one workshop I said it takes me 6 to 10 hours. In another video I said it can take a full business day or two. The good news is that most questions repeat. One investor has 50 questions and another has 35 or 65, and maybe five of them differ.
So every new question you answer goes into your master template. Then you can tell the next investor you have a thorough document that answers everything they asked plus more. In my experience about 95 percent say sure. Some need your answers entered into their own database, and that is fine.
Here I walk through where the questionnaire came from and how a master version saves you time.
What goes into the answers
Be accurate and transparent. Cite your sources. Point out what you learned from past problems. These are the kinds of items I mean:
- Bios of the team and key people
- Examples and screenshots that show how you work
- A track record from a previous employer, if you have one and are able to share it
- A few graphs and credible stats
- Evidence you have no style drift
- What happened to performance when a CIO left and was replaced
Over time you should be disclosing more, not less. Many managers talk to a securities attorney about how disclosures are worded across their offering documents, pitch deck and DDQ.
Why it matters if you want multi-family offices
A multi-family office may represent 20, 50 or 100 clients. If you win over one investment committee, they might place 10 or 30 investors into your deal. That can mean raising $10 million to $50 million at a time.
This clip explains why a master questionnaire pays off when you want wealth managers and multi-family offices to allocate.
You do not need to be at that level today. If you have raised a few million dollar checks and want to go further, having the document ready makes you look prepared.
From the Family Office Club stage
One point I want fund managers to take from this is that you should not wait until you feel big enough to need a due diligence questionnaire. Smaller capital raisers taking checks of $50,000 at a time almost never have a master version, yet those investors keep asking what else they should be asking. Having the institutional version ready helps them too. And you do not want to mess up a relationship with a $100 million net worth family because you decided you were not at that level yet.
"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 the institutional investors require would help you at that high net worth level."
"You don't want to drop the ball and mess up a relationship with a $100 million net worth family because you thought, "Oh, well, we're not really at that level yet, so we're not going to do a due diligence questionnaire."."
From the source
- Institutional due diligence questionnaires usually run 35 to 70 questions.
- Richard has never met an investor worth less than $300 to $500 million who required a DDQ in 18 years.
- Winning one multi-family office investment committee can mean raising $10 million to $50 million at a time.
Sources
From Richard C. Wilson's Centimillionaire Strategies YouTube channel: 2 Critical Core Due Diligence Tools - Episode 4, The #1 Strategy to Attract Investors Due Diligence Advantage | Capital Raising Workshop, 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 final DDQ wording, offering documents and disclosure practices. Do not use AI to write your own legal agreements.
Your next steps
- Download or write a DDQ template and customize it to your strategy.
- Answer every question accurately and cite your sources.
- Add bios, track record and examples that you are willing to share openly.
- Add each new investor question to the master document.
- Many managers ask a securities attorney to review the final wording.
More questions on this
How long does a first DDQ take to complete?
In my experience it takes a full business day or two, and I have said 6 to 10 hours from scratch. After that the master copy makes each new one much faster.
Will smaller investors ask for a DDQ?
Rarely. I have never met someone worth less than $300 to $500 million who required one. Many smaller investors still appreciate having one when they run out of questions.
What if an investor insists on their own form?
Offer your master document first. Some investors need the answers entered into their own database, so be ready to copy them over.
Related questions
- How do institutional investors evaluate a manager's ESG policy?Institutional investors judge an ESG policy as part of their wider review of a manager.
- What track record do institutions require before investing in a fund?Many institutions want a team larger than two or three people, a track record of about seven years or more, and at least a dozen deals done.
- What are emerging manager programs and how do I qualify?Emerging manager programs are allocations some institutions set aside for newer fund managers.
- 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.