Investment Management

SFG Investment Due Diligence Process

What is due diligence? 

Due diligence is the investigation of an underlying investment opportunity. It seeks to provide answers to the question “What are the potential risks of this investment?” so an investor can make a well-informed decision prior to investing capital in the opportunity.

What is SFG’s process? 

Our process can be broken down into three main parts: 

  1. Investment Due Diligence focuses on understanding the ins and outs of the investment strategy, the investment manager, and the terms to which an investor would be agreeing to, among others. We conduct a quantitative analysis to determine the feasibility of the investment strategy, the risk vs. return profile, the portfolio’s volatility, market sector outlook, and the manager’s track record of achieving an investment’s target return through various market cycles, to name a few.
  2. Operational Due Diligence focuses on the risks associated with the execution of organizational functions. It analyzes the structure of both the investment manager and investment fund entities. Specifically, we conduct a qualitative analysis to assess the risks associated with the investment manager’s policies and procedures (e.g., cash management policy, valuation policy, business continuity plan…etc.) and insurance policies (e.g., E&O, D&O, Cybersecurity…etc.), key person background checks, investment manager style drift, litigation involving the investment or investment manager, third-party providers and counterparties, trade reconciliations and financial statements, in-person or video conference meetings with investment managers, and the investment’s terms and documentation, among others. We also conduct on-site visits, when possible.
  3. Once invested, it is important to conduct Ongoing Due Diligence. While Investment Due Diligence and Operational Due Diligence take into account information available prior to investing, Ongoing Due Diligence takes into account information received after an investment has been made. This allows us to potentially identify  new risks that may arise or any changes to risks identified after conducting Investment Due Diligence and Operational Due Diligence. 
Why is due diligence important? 

Due diligence helps us identify risks associated with an investment prior to our clients allocating capital. This is especially important in the context of alternative investments (e.g., private real estate, private debt/credit, private natural resources, private equity, and hedge funds), because, once invested, an investor’s capital may be illiquid for a period of five to seven years, sometimes longer. Once the risks associated with a particular investment opportunity are identified, we can determine a client’s suitability for the investment opportunity based on their risk tolerance and portfolio objectives and constraints. Then, we provide the client with information they need to make a well-informed decision.

At SFG, we understand the risks facing today’s investors and take our role as a fiduciary very seriously. We believe transparency is the key to building trust between us and the client.

Tony Miller is an Investment Manager, Private Investments with Schultz Financial Group Inc.

Schultz Financial Group Inc. (SFG) is a wealth management firm located in Reno, NV. Our approach to wealth management is different from many other wealth managers, financial advisors, and financial planners. Our team of fee-only fiduciaries strives to help our clients build their wealth across four capitals: Financial Matters, Physical Well-being, Psychological Space, and Intellectual Engagement. We provide family office and wealth management services to clients located in Nevada, California, and other states. If you’d like more information, please check out our website or reach out to us via our contact page.

  • Schultz Financial Group, Inc. (“SFG”) which is a registered investment adviser, drafted this blog post for its website and for the use of its clients or potential clients. Any other distribution of this blog post is strictly prohibited. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that SFG has attained a certain level of skill, training, or ability. While the content presented is believed to be factual and up to date, it is based on information obtained from a variety of sources. SFG believes this information is reliable, however, it has not necessarily been independently verified. SFG does not guarantee the complete accuracy of all data in this blog post, and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of SFG as of the date of publication and are subject to change. This blog post does not constitute personalized advice from SFG or its affiliated investment professionals, or a solicitation to execute specific securities transactions. SFG is not a law firm and does not intend for any content to be construed as legal advice. Readers should not use any of this content as the sole basis for any investment, financial planning, tax, legal or other decisions. Rather, SFG recommends that readers consult SFG and their other professional advisers (including their lawyers and accountants) and consider independent due diligence before implementing any of the options directly or indirectly referenced in this blog post. Past performance does not guarantee future results. All investment strategies have the potential for profit or loss, and different investments and types of investments involve varying degrees of risk. There can be no assurance that the future performance of any specific investment or investment strategy, including those undertaken or recommended by SFG, will be profitable or equal any historical performance level. Any index performance data directly or indirectly referenced in this blog post is based on data from the respective copyright holders, trademark holders, or publication/distribution right owners of each index. The indexes do not reflect the deduction of transaction fees, custodial charges, or management fees, which would decrease historical performance results. Indexes are unmanaged, and investors cannot invest directly in an index. Additional information about SFG, including its Form ADV Part 2A describing its services, fees, and applicable conflicts of interest and Form CRS is available upon request and at https://adviserinfo.sec.gov/firm/summary/108724.

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