40.2 STRATEGY-SPECIFIC DUE DILIGENCE
This section focuses on strategy-specific issues arising in a due diligence process. Rather than being exhaustive, this section concentrates on the major hedge fund strategies and discusses some specific questions related to each of them. Beyond hedge funds, strategy-specific risks should be discussed with all asset managers, whether in traditional investments, private equity, or real assets.
40.2.1 Long/Short Equity
Long/short equity is one of the larger hedge fund categories, both in number of funds and in assets under management. It primarily involves buying equities that are expected to increase in value and selling short equities that are expected to decrease in value.
Essential due diligence questions for a long/short equity fund should include the following: