In November 2013, Sascha was invited to speak at a two-day Family Office event hosted at the Balder Grand in Zurich, Switzerland. The event was organized by Prestel and Partner, as a working forum focused on German Family Offices. However, some high profile family office participants from the rest of Europe, Asia and the US also attended and we had some great one-on-one conversations at the event. Prestel and Partner deserve much credit for ensuring an impressive participant line up at a stunning location.

Sascha’s presentation provided CITE with an opportunity to engage investors on the topic of investment due diligence. No doubt, it was challenging to pitch to an audience who mostly regard hedge funds as ‘locusts’ and in the main prefer domestic (German) private equity deals over international ones.

The audience had mixed views on the range of due diligence challenges that prevail today. Sascha reinforced the importance of manager due diligence in the allocators’ decisions, emphasizing the various aspects of both investment and operational due diligence, over and above the usual “past performance” review.

Our view is that due diligence must be looked at holistically and that due diligence has a price tag. In a nutshell: too little due diligence and at worst an investor stands the chance of losing the principal amount invested, too much due diligence and the costs may become prohibitive across a portfolio of investments.

Sascha’s presentation was followed by a lively Q&A session, with Sascha’s cross asset class due diligence perspective allowing for a broader discussion beyond the German audience’s usual private equity focus. Many of the hedge fund nuances were new to the audience and Sascha’s depth of insight highlighted the disconnect between due diligence as it is customarily performed and the holistic business assessment that is truly needed when making an investment decision.

We left the audience with a couple of takeaways:

  • Due Diligence duration: making an invest/divest call is for a reason and one should not change one’s views moments after that call has been made (decision paralysis)
  • Believe in gentleman’s agreements: if you agree terms verbally (whatever they may be) and if a manager subsequently breaks them – walk
  • Use references: we recommend calling a significant number of referees per portfolio manager (easily done in Hedge Fund land, harder in Private Equity)
  • Get on the road: do visit companies – don’t just meet fund managers. There is a lot to learn when talking to CEO, CFO and COO!

The ensuing panel discussion was hosted by Markus Hill (Media) and joint panelists were Dr Manfred Adami, Rosie Norris and Dr rer. nat. Daniel Ziggel.

On the second day, Sascha participated in a panel discussion on “Risk Management as part of your allocation” which was hosted by Alexander Pick (Allianz Global Investors). The discussion focused on the parameters of asset allocation and there was a lively debate among the panelists as to whether a structured, top down model serves clients better than a fundamental bottom up approach with loose allocation parameters in terms of geographical or style attributes. Our view is that investors should form a macro view, and then use the manager allocation decision as a means to execute and achieve the medium- to long-term investment and performance goals.