In response to concern about the rapid, global spread of COVID-19, 29% of investment due diligence officers working for asset owners said they no longer conduct on-site reviews with their money managers and other service providers, results of a survey by the Investment Management Due Diligence Association showed.
A majority (52%) of the 672 respondents to IMDDA's recent survey said their due diligence practices have not changed. The remaining 19% of respondents said they don't conduct on-site due diligence on the money managers whose strategies they invest in.
Daniel A. Strachman, IMDDA's co-founder and managing director, offered advice to asset owners that want to avoid in-person meetings.
"Videoconferencing technology is pretty good and it's an adequate substitute for in-person meetings with money managers and other providers. Reading the body language of the employees of the firms you're evaluating is a very important component of due diligence. Videoconferencing allows you to do that remotely," Mr. Strachman said.
IMDDA recommends other actions institutional investors can take to protect their assets if their money managers, custodians, auditors and other service providers experience service interruptions, including asking money managers for side letters that allow them to redeem their investments or switch to a separately managed account that they control, and obtaining the disaster plans of all external service providers and verifying that each company has the capability to switch locations to provide primary functions if one site is impaired.