Hedge Fund Analysis: An In-Depth Guide to Evaluating Return Potential and Assessing Risks

Chapter 8

Onsite Interviews

“The most important thing in communication is hearing what isn't said.”

Peter F. Drucker

“I never learn anything talking. I only learn things when I ask questions.”

Lou Holtz

“Effective communication is 20 percent what you know and 80 percent how you feel about what you know.”

Jim Rohn

At this stage, we have done a fair amount of work on FCM. The process started by setting search criteria and compiling a list of potential hedge funds to review. We then reviewed the list and after applying various quantitative and qualitative filters we narrowed the search universe to five hedge funds (Chapter 3). Upon receiving the basic materials to review directly from the manager (Chapter 4), we initiated a brief telephone interview to answer any outstanding questions we had at that time and to gain a richer understanding of the three Ps: people, process, and philosophy. We conducted an interview (Chapter 5) with the hedge fund's director of research, Jaime Wernick, and ultimately concluded that we would take FCM further in the due diligence process.

That's where things started to get a bit more intense. We requested additional performance, exposure, and portfolio information (most of which was sent immediately—the lone exception was position-level transparency). We then conducted a thorough quantitative analysis (Chapter 6), which served to answer some outstanding questions and to raise some new ones. Finally, we used the portfolio information that was available ...