Hedge fund op risk due diligence practice launched

Duff & Phelphs sets up hedge fund operational risk due diligence practice

NEW YORK - Duff & Phelps, an independent financial advisory and investment banking firm, has announced the formation of an operational risk due diligence (ORDD) practice to provide investors with an independent third-party assessment of their hedge fund manager's operating policies and procedures.

The practice will help a wide range of investors, including pension plans, endowments, family offices and funds of funds, to assess the operational risks associated with their alternative investments and provide solutions to mitigate those risks.

"In an era of heightened scrutiny, robust operational and risk policies and procedures are critical to attracting and keeping investors," says Gerry Creagh, president of Duff & Phelps. "Proper assessment of a fund's legal and operational infrastructure enhances transparency and has the potential to reduce risk to funds and investors."

The ORDD practice is led by new Duff & Phelps director Eric Lazear, a well-known operational risk practitioner and thought leader. Lazear specialises in fund structures, trading processes, legal issues and pricing procedures and is a frequent speaker at conferences around the world. Prior to joining Duff & Phelps in the New York office, Lazear was head of operational due diligence for a London-based fund of hedge funds for institutions and private clients. He was responsible for conducting operational and business risk reviews of hedge fund managers and oversaw operational risk reviews for an array of hedge fund strategies worldwide.

"Research has shown that more than 50% of hedge fund failures are caused by operational issues," says Michael Athanason, head of Duff & Phelps's corporate finance consulting segment. "Under the experienced leadership of Eric Lazear, the ORDD practice offers a complementary service to our private equity and hedge fund clients, and increases security for their investors."