Financial advisory firm Duff & Phelps is delving into the hedge fund world with the formation of an operational risk due diligence practice.
The new practice will provide investors with an independent third party assessment of their hedge fund manager's operating policies and procedures. The practice will assist a wide range of investors, including pension plans, endowments, family offices and fund 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," said 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 specializes 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, where 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 over 50% of hedge fund failures are caused by operational issues," said Michael Athanason, head of Duff & Phelps' corporate finance consulting business. "Under the experienced leadership of Eric Lazear, the Operational Risk Due Diligence practice offers a complementary service to our private equity and hedge fund clients and increases security for their investors."