Manager Due Diligence Report Template (IDD and ODD)

Manager Due Diligence Report: [Manager name], [Strategy or fund name]

Combined investment and operational due diligence (IDD and ODD) report written by an allocator (pension fund, endowment, fund of funds, consultant, wealth platform or family office) before hiring or re-approving an external investment manager. It records scope, the firm, strategy, team, track record, risk management, operations, compliance and regulatory history, technology and cybersecurity, responsible investment, terms and fees, findings with a rating and conditions, a monitoring plan and an original question set. It supports the prudence duty of fiduciaries such as ERISA section 404(a)(1)(B) (29 U.S.C. 1104) and product governance by distributors, as of 2026-10. Topic coverage is comparable to industry questionnaires such as the ILPA Due Diligence Questionnaire (DDQ 2.0, November 2021) and the AIMA Illustrative DDQ (2025 edition), which this template neither reproduces nor adapts; obtain them from ilpa.org and aima.org. Replace every [bracketed] value and every row marked Example. This is a document format, not financial, investment, legal or tax advice. Obtain the standard or law for the normative text.

Document control

Approvals

Revision history

Contents

1. Scope, mandate and method
2. Executive summary and rating
3. Firm, ownership and stability
4. Investment strategy and process
5. Team and resources
6. Track record and performance analysis
7. Risk management
8. Operations and service providers
9. Compliance, regulatory history and conflicts
10. Technology, cybersecurity and business continuity
11. Responsible investment
12. Terms, fees and alignment
13. Findings, rating and conditions
14. Monitoring plan
15. Appendix A: Question set
16. Appendix B: Evidence log
17. Glossary and references
18. Standard and licence note

1. Scope, mandate and method

Method used in this review:

1. Screen the universe against the mandate criteria and record the shortlist.
2. Send the question set in Appendix A and the document request list; receive the manager's own industry DDQ if available.
3. Review public records: regulatory filings (for a US adviser, Form ADV Parts 1 and 2 on the SEC's Investment Adviser Public Disclosure site), court and sanctions searches, media.
4. Analyse returns and holdings data independently (section 6).
5. Hold meetings with the portfolio managers, the chief operating officer, the chief compliance officer and the head of risk, and observe at least one investment meeting where possible.
6. Confirm assets, valuations and fees directly with the administrator, custodian and auditor.
7. Score each area, record findings and conditions (section 13).

Record the depth actually achieved, not the depth planned. If the administrator would not confirm directly, or a key person was not available for interview, say so here and reflect it in the rating of the affected area.

2. Executive summary and rating

Rating scale for IDD areas: 1 Unacceptable, 2 Weak, 3 Acceptable, 4 Strong, 5 Exceptional. ODD uses Pass, Pass with conditions or Fail. Define each level in your manager research policy so that ratings are comparable across reviews.

3. Firm, ownership and stability

Example: Kestrel Bay Capital is 82% owned by eleven employees and 18% by a passive minority investor with no board seat. Firm regulatory AUM is USD 2.48bn at 2025-12-31 (matching Form ADV Part 2A Item 4.E), of which the credit strategy is USD 1.55bn; the largest client is 9% of strategy AUM. The proposed USD 75m mandate would be 75 / 1,550 = 4.8% of strategy AUM, within the 5% limit in section 13.3. Management accounts show the firm covers fixed costs at about 60% of current revenue.

4. Investment strategy and process

Cover each step, with what you observed and what evidence supports it:

State how the strategy behaved in at least two contrasting market regimes and whether the explanation the manager gives matches the attribution in section 6.

5. Team and resources

Record team turnover over five years (joiners, leavers, reasons), compensation structure (base, bonus, deferral, equity, link to long-term client returns) and the analyst coverage ratio. For each key person, state the contractual key person provision and what it triggers for clients.

6. Track record and performance analysis

6.1 Record integrity

GIPS® is a registered trademark; where the report reproduces a manager's GIPS claim, insert the notice required by its owner's trademark guidelines (see Performance Composite Report, finance/performance-composite-report). A manager's claim of compliance is its own; this review does not make any firm compliant.

6.2 Returns and risk

Conventions: USD, net of the fee schedule in section 12, calendar years, annualised figures use geometric linking.

Annualised return over $N$ years from annual returns $R_t$:

Strategy: 1.061 x 0.966 x 1.118 x 1.080 x 1.075 = 1.3304, so $R_{ann} = 1.3304^{0.2} - 1 = 5.87\%$. Benchmark: 1.2603, so 4.74%.

Risk-adjusted measures, with risk-free rate $R_f$, volatility $\sigma_p$, active return $R_p - R_b$ and tracking error $TE$ (all annualised from monthly data):

6.3 Attribution and consistency

Explain where excess return came from (sector or issuer selection, duration, curve, credit quality, currency, timing) using the manager's attribution and your own holdings-based check. See Performance Attribution Report (finance/performance-attribution-report) for methods. Report rolling three-year excess returns and the share of rolling periods with positive excess return; a record that depends on one year deserves a lower rating.

7. Risk management

Example: Liquidity stress test assumes 25% of strategy AUM redeemed within one month; 71% of holdings can be sold within five trading days at no more than a 2% price impact under the manager's own model.

8. Operations and service providers

8.1 Trade lifecycle and controls

8.2 Service providers

For a US private fund relying on the audit approach under the custody rule (17 CFR 275.206(4)-2(b)(4)), confirm the auditor is PCAOB-registered and inspected and that audited financial statements reach investors within 120 days of fiscal year end. For an EU alternative investment fund, confirm the depositary appointment (AIFMD Article 21) and whether valuation is performed by an external valuer or by the AIFM with functional independence (AIFMD Article 19(4)).

9. Compliance, regulatory history and conflicts

Related templates: Annual Compliance Review (compliance/annual-compliance-review), Investment Adviser Code of Ethics (compliance/investment-adviser-code-of-ethics), Conflicts of Interest Register (compliance/conflicts-of-interest-register), Form ADV Part 2A Brochure (compliance/form-adv-part-2a-brochure).

10. Technology, cybersecurity and business continuity

11. Responsible investment

12. Terms, fees and alignment

Example fee calculation for a USD 75m mandate: 0.45% x 50m = USD 225,000; 0.35% x 25m = USD 87,500; total USD 312,500 a year, an effective rate of 312,500 / 75,000,000 = 0.417%.

Restate the five-year net return in section 6.2 using this fee schedule if the published net figures used a different fee.

13. Findings, rating and conditions

13.1 Findings register

Severity: High (must be fixed before funding or blocks hire), Medium (condition with a date), Low (observation).

13.2 Conditions

13.3 Recommendation

State the recommendation (hire, hire with conditions, watch, reject), the mandate size, any limit on allocation as a share of the manager's strategy AUM (Example: our assets no more than 5% of strategy AUM) and the date of the next review.

13.4 Writing findings and reviewing the report

Write each finding so that the investment committee can understand the risk without reading the rest of the report: state the condition you observed, the standard you expected, the evidence ID, the effect on the mandate if it is not fixed, and the manager's response. Avoid adjectives such as "robust" or "weak" without the fact behind them.

Rate severity from the effect on the allocator's clients, not from how hard the fix is. A single-preparer reconciliation of collateral (F-003) is High because an undetected break could misstate the account value and the collateral the client relies on; a stale penetration test (F-004) is Medium because the control exists but its assurance is out of date.

Before the report goes to the investment committee, a reviewer who did not take part in the diligence checks that:

1. every rating in section 2 matches the findings and evidence in the later sections, and no area is rated without evidence;
2. the performance figures were recomputed from source data, use the fee schedule the allocator would pay and compare like with like (currency, gross or net, benchmark hedging);
3. service provider confirmations were received directly from the provider, not forwarded by the manager;
4. the ODD outcome is shown separately and was not averaged into the investment rating;
5. the proposed mandate respects the concentration limit in section 13.3 (in the example, USD 75m is 4.8% of the USD 1.55bn strategy); and
6. each condition has an owner on both sides and a date, and the funding instruction cannot be released before the "before funding" conditions are verified.

Common errors in practice: accepting the manager's DDQ answers as evidence; leaving the background checks to the end, so that a finding arrives after the committee has met; and re-using the prior year's report text without re-testing the areas it describes. A re-review should show what changed since the last report and close or re-open each earlier finding explicitly.

14. Monitoring plan

15. Appendix A: Question set

16. Appendix B: Evidence log

Traceability check: every finding and rating in sections 3 to 12 cites an evidence ID (add an Evidence column to any table that lacks one), every finding in section 13 cites the section it came from, and every condition cites a finding.

17. Glossary and references

References (obtain current versions):

• Employee Retirement Income Security Act of 1974, section 404(a) (29 U.S.C. 1104(a)), fiduciary duties.
• 17 CFR 275.206(4)-7 (compliance procedures and practices) and 17 CFR 275.206(4)-2 (custody), eCFR.
• Directive 2011/61/EU (AIFMD), Articles 19 and 21, EUR-Lex.
• Regulation (EU) 2019/2088 (SFDR), EUR-Lex.
• ILPA Due Diligence Questionnaire 2.0 (November 2021) and AIMA Illustrative DDQ for Investment Managers (2025 edition): names only.
• GIPS standards, 2020 edition (name only).
• Related templates: Investment Committee Memo (finance/investment-committee-memo), Investment Policy Statement (Institutional) (finance/investment-policy-statement-institutional), Performance Composite Report (finance/performance-composite-report), Valuation Policy (compliance/valuation-policy), Due Diligence Request List (finance/due-diligence-request-list).

Standard and licence note

Based on public law cited by section number: ERISA section 404(a) and SEC rules in 17 CFR Part 275 (US government works) and EU legislation from EUR-Lex (reuse with acknowledgement under Commission Decision 2011/833/EU). Structure aligned with common allocator practice for investment and operational due diligence. The ILPA DDQ 2.0, the AIMA Illustrative DDQ and the GIPS standards are cited by name only; no question, wording, ordering or layout from them is reproduced or adapted, and the question set in Appendix A is original. GIPS® is a registered trademark of its owner; insert the notice its trademark guidelines require where a GIPS claim is shown. This template is not affiliated with or endorsed by ILPA, AIMA, the GIPS standards owner or any regulator. All names and figures in the examples are fictional. This template is original text written for this collection. Check the current official versions before use. Template licence: MIT.