How You Can Tackle the Brave New World of Virtual Operational Due Diligence

The closing of non-essential workplaces during the COVID-19 pandemic is shaking up the way hedge funds do business.

4 May 2020

Operational Due Diligence

The remote working environment is raising an assortment of new operational challenges related to investor transparency, communication and data security. To continue operations, many firms are looking at implementing a virtual process for Operational Due Diligence (ODD), which can increase their risk of exposing sensitive IP without a secure virtual process in place.

It’s no surprise the process must continue in this new world. ODD plays a key role in the allocation of investor capital, especially in the current environment. Capital raising is more competitive than ever, managers are aggressively competing for limited investor capital to pursue new investment opportunities that are rapidly emerging. But to be successful, fund managers must grapple with the balancing act of providing transparency and keeping data secure. Traditionally hedge funds would invite investors onsite to conduct ODD audits and avoid any virtual correspondence that would put them at risk of a data security breach. How can you implement a virtual process for ODD?

Email is not a foolproof method

One option is to email correspondences and documents, but this is not a secure method of furnishing information to investors. Beyond just security, the issue here is that the fund manager has no visibility into where the shared information is traveling and how investors are interpreting the information. ODD documents such as compliance manuals can be bulky and “a work-in-progress” – and information contained may be misconstrued if the fund manager is not physically present to walk through it with the ODD team.

Another option is to use consumer-grade file-sharing tools, which are more efficient than email, but, again, not secure or effective. In addition, many institutional investors have restrictive firewalls in place, particularly while working remotely, which could prevent access to any tools that aren’t whitelisted. So, what is a reliable and effective solution?

Securing data through online portals

ODD correspondence and documents are more secure when a fund engages specialist hedge fund technology providers. Certain hedge funds are utilizing secure online portals that provide information rights management (IRM) with file-level protection for docs shared outside a company’s firewall – even after those files have been downloaded. Investors today understand the confidential nature of fund-related information and are open to receiving documents with IRM protection enabled. It’s important to look for a portal that is easy to use and offers a seamless experience for investors, without the need to download plugins to view protected documents. All files should be made available in their native formats. Watermarking, “no print” / “no download” settings and password protection can be applied to marketing materials, portfolio information and strategy information to protect IP from unauthorized use and access.


Many portals offer audit trails that give managers insight into which investors are looking at which documents and ensure IP is not being shared more broadly.

Do you think online portals can offer a solution to securing data in the ODD process? I would love to hear your thoughts and comments. 


Tracy Moors Intralinks

Tracy Moors

As a Team Lead within Alternative Investments, Tracy is focused on the growth and strategy of the hedge fund client base at SS&C Intralinks. His team works with clients across North America on all facets of their fund lifecycles, from capital raising to investment activity to investor reporting. Tracy joined Intralinks in 2018 having previously worked for 15 years in financial services focused on capital markets advisory, sales, trading and research services.

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