Top Tips for Due Diligence Teams When Creating DDQs - Part 1

Q: Can you tell us more about the variations in data collection methods used by Dasseti’s allocator and consultant clients when conducting due diligence?

AP: Most allocators and consultants use questionnaires to collect qualitative and quantitative data from their managers. The questions might cover the manager themselves if it is an operational due diligence questionnaire, the funds or the portfolio companies, in a private equity investment portfolio.

They might also combine this with on site, or telephone interviews, information collected from a data room, or other research.

The process to collect this information greatly varies with some preferring to use industry standard questionnaires, like the AIMA or ILPA DDQs, and others using custom questionnaires they have designed internally.

We often find that there is a huge variation in the length of the questionnaire, and number of questions, the type of questions, check box, or open ended, and how to include conditional questions.

Q: Does it make a big difference to the response rate and the data collected, if the questionnaire is designed differently?

AP: It can make a big difference to the manager if they receive lots of questionnaires in different styles and formats. They have to adjust their internal response process to manage the flow, length and question types, coupled with the different ways they receive the questionnaires, such as through a digital platform, in a Word document, PDF or Excel sheet.

As a technology provider to both sides - asset allocators and asset managers, our role is to assist both sides to find a common ground that allows everyone to collect or provide the required information in the most optimal way!

Q: What advice can you give allocators when they are designing questionnaires?

AP: We have put together some recommended practices for allocator clients when designing questionnaires, using practical examples of challenges that clients faced.

The first is the number of questions. We advise our clients to limit the number of questions in a questionnaire. This is based on feedback received from asset managers and based on statistical evidence using internal data (response rate and time to respond). A 500 question document might not seem onerous if you had just one to complete, but for managers with multiple funds and multiple allocators, it can quickly become unmanageable.

Q: So how do allocators structure a questionnaire in order to get the information they need?

AP: To improve user experience whilst continuing to capture the required information, we work with our asset allocators (during onboarding and as part of our support model) and advise on the following:

Tables: Table are a great tool to gather information. It can be easier to complete for an asset manager than standalone questions.

Nested questions: Our platform allows for conditional questions . This can greatly reduce the number of questions since questions are only added when certain conditions are met

Splitting questions in multiple questionnaires: We sometimes advise our clients to split questions across a few questionnaires. For example, clients could develop Firm and Product specific questionnaires, create standalone documentation requests or Key Data questionnaires. One benefit of splitting them and having shorter questionnaires is that different deadlines can be set for each of them.

Q: And how do we help managers to cope with the incoming questionnaires?

AP: We always have managers and other respondents in mind and have the following features embedded in the platform:

Export to Excel: We understand that it may not always be practical to have all the relevant subject matter experts responding to a questionnaire online. Once completed, the excel questionnaire can be easily imported back into the platform.

Response per product: We have developed a functionality that allows allocators to breakdown and to send separate questionnaires for each fund/investment that are covered in the questionnaire

Smart Search: When managers respond directly in the platform, they are able to use our Smart Search technology (finding similar questions that have been responded to in the past through our platform)

Pre-filling: we work closely with allocator clients to use the platform’s pre-fill functionality. This provides managers with some pre-populated answers which can then be reviewed and edited, speeding things up considerably!

In the next few articles we will cover a few more tips, stay tuned!