“Throughout my experience, I saw a factory approach to ODD reports which inspired no confidence that a thorough operational review had been
James Newman, Co-Founder
A bonus is that perfORM clients get portal access to receive information, analysis and charts, to manage the ODD process from their end.
ODD with an investor mentality “I have been an allocator for 20 years, responsible for end clients’ exposure to operational risks, and I always think about whether I would invest my own money,” says Newman.
Thus, perfORM have the mindset of an investor but, in contrast to investment consultants, they are not offering manager searches, ratings, portfolio construction or investment due diligence (“IDD”). There are important overlaps between ODD and IDD in several areas, but the perspectives and emphases are different. Newman lists four examples: valuation (what are my investments worth?); liquidity (actual time to cash); risk management (competence and independence); and background checks (looking for skeletons):-
“Valuation: IDD seeks to understand how the portfolio is being valued, particularly for harder- to-value Level 3-line items. ODD is more interested in the integrity, method and independence of valuations,” says Newman.
Liquidity: IDD ranks managers and funds on liquidity risk and avoiding mismatches. ODD also covers this, and will dig deeper into the investor cohort and
concentration dynamics, since a large redemption can impose costs on a liquid portfolio that are borne by longer term investors, in vehicles without exit fees or swing pricing. Additionally, some types of investors tend to be stickier than others.
Risk management: IDD considers portfolio risk management and stress testing, whereas ODD will pay more attention to the integrity, independence and veto power of a risk management team or CRO.
Background checks: IDD tends to complete background checks on key investment personnel at an investment manager. ODD will run those same checks on non-investment personnel such as the COO and take this to the next level by looking at the asset manager’s own policies on doing background checks on its staff and hires.”
Manager therapy and reports Whereas investment consultants who also have fiduciary responsibility generally only act for allocators, perfORM is different.
“Our liberated ODD business can also act for asset managers and service providers, though the largest part of the business remains manager ODD commissioned by allocators,” says Thom.
Two services can be offered to managers. ODD Manager Therapy generates a remediation memo
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completed.” — JAMES NEWMAN
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