Because alternative investments, such as private equity,
hedge funds and real assets, are typically accessed though a limited
partnership structure, retirement plan fiduciaries are charged with more
extensive due diligence as compared to monitoring daily valued mutual
funds or separate accounts. With endowments, foundations and pension portfolios
having increased their commitments to alternative investments, more fiduciaries
are becoming aware that they need a detailed monitoring process for their
complex investments.
The investment adviser’s duties of conducting routine due
diligence on alternatives should include a quarterly checklist to aid board
members and key employees at the organization in carrying out their fiduciary
duties. Here’s a roadmap of some key areas that should be reviewed
periodically by both the investment adviser (IA) and a key employee (KE) at the
company sponsoring the retirement plan. In addition to helping
fiduciaries, an alternative investment checklist may assist an institution with
its annual audit. The criteria below can be applied to all types of alternative
investments.
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