Both professional fund investors and asset managers are wasting valuable time in fund due diligence. The processes fund investors use to collect, and asset managers use to provide, due diligence information on funds are outdated and long due an upgrade.
Fund investors would like to spend less time gathering and organising information and more time performing analysis. Asset managers have similar inefficiencies. They are spending too much time repetitively ‘cutting and pasting’ the same content to respond to similar fund investor requests. Asset managers want to provide high quality information, faster responses, greater transparency – and highlight the strengths of their offering.
At Door, we are reimagining the future of fund due diligence. Bringing asset managers and professional fund investors together, we have collaborated on a new industry-led platform – a digital solution to streamline the due diligence process and drive value to all participants.
Door is solving a common problem
The challenge for fund investors is that fund information is not always provided by managers quickly and in consistent and easily comparable formats. While DDQs are a primary source of critical information for undertaking fund research and ongoing monitoring, current industry practice involves exchanging Word or Excel documents over email. The process is slow and archaic. Changes to information through time are not easily captured or understood.
Today, we know professional fund investors are spending as much as two thirds of their time gathering and organising basic due diligence information on funds and only one third on analysis and decision-making. Door aims to put better, more efficient tools into the hands of fund investors and to make responding to information requests more it more efficient for asset managers to respond to information requests.
Receiving fund information quickly and in an easily comparable format is key. Door is making this possible. We have brought together principles of standardisation and digitisation. This combination creates far-reaching benefits for professional fund investors and asset management companies alike.
Creating industry best practice
There is a high level of overlap between the questions asked by professional investors in their DDQs. While differing in shape and size, the vast majority of questions asked by investors intend to elicit similar responses from asset managers. Our research shows that over 90% of all the questions asked by investors of asset managers’ products around the world are common!
Standardisation has played an important role in the development of many modern advancements. It provides the basis for consistency in measurement and technical development.
The benefits of applying best practice standards to the questionnaire process were recognized first by the professional fund investor community – within the membership of the Association of Professional Fund Investors (APFI). Door has worked alongside APFI to deliver an independent and industry-led solution that continues to evolve with the changing investment environment and due diligence requirements: The Standard Questionnaire.
The Standard Questionnaire was built through an intensive 12-month collaboration that explored a wide array of questionnaires, RFPs, RFIs and DDQs from around the world and across many categories of investors. Dozens of participants, including leading global fund investors and asset management firms, provided input and feedback. 500 hours of research, analysis and collaboration went into the development of The Standard Questionnaire. With the support of the firms collaborating on Door, The Standard Questionnaire is fast becoming the new industry best practice. Asset managers’ responses to The Standard Questionnaire are designed to sit at the ‘core’ of a fund investor’s due diligence information gathering process. One of the key benefits of The Standard Questionnaire is that asset managers can better understand the information requirements of their clients. The questions are clear and easily understood. The quality of responses and the level of transparency improves.
Fund selectors point out that it takes far too long to receive responses to information requests: a turnaround time of three to five weeks. Asset managers are challenged with an ever-growing backlog of requests. Door enables asset managers to provide access to The Standard Questionnaire for their funds to fund investors on a real-time basis and investors are alerted to the most recent changes to information.
Fund selectors also struggle with the level of quality and depth of responses to questions asked. Because volumes are so high and asset managers receive many similarly worded questions, they often simply ‘cut/paste’ ready made responses. In many cases, these responses are a good fit for a question posed but too often, similar sounding questions don’t receive adequate attention. With a wider breadth of questions being asked, the depth and quality of responses suffer.
Tools for Humans
We believe that fund due diligence is a vital function. We believe that humans, not robots, are best equipped to make investment decisions on funds. In depth analysis and ongoing reviews of both robust qualitative and quantitative information is crucial. As both funds and asset management firms are ultimately managed by people, we think it takes solid human judgment and decision-making to invest in them. To make decisions, fund investors must have robust, up to date, easily comparable information. Changes to information need to be communicated more quickly.
Door’s aims are simple. We want to improve the due diligence information gathering process. We want professional fund investors to be able to apply their analysis to easily comparable, deep fund information. We want faster and more democratic communication of changes to information.
We want to give back the time to both fund investors and asset managers to focus on value.
About Door collaborators
Collaboration and mutual understanding are key facets of Door’s success. As Co-Founders of Door, we have brought together complementary, hands-on experience from both sides of the due diligence process.
The industry has been seeking innovation. So, Door brought the innovators together. The firms helping our drive for change include All Funds, Santander, Mediolanum, Pictet Wealth and EFG. Asset managers include Franklin Templeton, Columbia Threadneedle, Schroders, Aberdeen Asset Management, Robeco, M&G, Artisan Partners, Aviva Investors, Pictet Asset Management and Nordea Asset Management. Door is now working with 20 cross-border asset managers and over 50 fund investor firms. The number grows daily.
If you would like to join our community, please visit www.doorfunds.com
Column by Door