Who makes the decision
Who actually makes the decision. Fund marketing often describes a process; it rarely names the person accountable for a specific loan or holding going wrong. An investor is entitled to know who sits on the investment committee, how decisions are made, and what happens when committee members disagree.
What happens when something goes wrong
What happens when something goes wrong, not just when it goes right. Every manager can describe a strong track record. Fewer can describe, clearly and specifically, how a recent problem asset was identified, managed and resolved. That history is a better guide to future conduct than a return figure from a good year.
How the investment is valued
How is the investment valued, and how often. For anything not traded on an open market, valuation is a judgment, not a fact. An investor should understand who sets the valuation, how often it is reviewed, and whether that person has an interest in the number being higher rather than lower.
The actual terms on liquidity
What are the actual terms on liquidity. "Redemptions processed regularly" and "redemptions available subject to fund liquidity" are different promises. An investor should know, in writing, what conditions could delay or suspend access to their capital, and how often that provision has been used.
Where interests align
Where does the manager's interest align with the investor's, and where might it not. Fee structures, related-party arrangements and co-investment by the manager all affect incentives. None of these make a manager unsuitable on their own; what matters is whether they are disclosed plainly and the investor understands them before committing.
What the questions do
These questions will not remove the risk of an investment underperforming or losing money. They are a way of making sure a decision is made with the full picture, not just the summary on the cover page.
This article is general information only. It does not take into account any person's objectives, financial situation or needs, and is not personal financial product advice.
