In this chapter, you will learn about the importance of due diligence, the qualitative and quantitative factors used to evaluate a hedge fund, the main components of a standard offering memorandum, and the warning signs of a hedge fund in trouble.

When you have completed this chapter, you should be able to:

·         state two reasons why due diligence is important in the selection of hedge funds 

·         identify and describe the qualitative factors that are part of the due diligence process

·         identify and describe the quantitative factors that are part of the due diligence process

·         describe the important aspects of an offering memorandum to clients

·         state the situations that may indicate underlying problems with a hedge fund