FCM and our Strategic Investor together bring over 75 years of experience managing traders and hedge fund managers. The extensive network of contacts combined with the global reach and prestige of the Strategic Investor provides the Concert portfolio with a continuous pipeline of managers. FCM analyzes this large universe of managers for the ones that not only will provide alpha, but will also offer an appropriate fit into the existing Concert portfolio.

Our swap provider, BNP Paribas, has developed a large, independent due diligence and hedge fund research team. In fact, they maintain a dynamic approved list exceeding 1600 hedge fund managers.  BNP performs an extensive due diligence process on each proposed fund and maintains veto rights over any manager considered for the Concert portfolio. Their process is somewhat different from ours as they grade each fund on a range of issues based on certain criteria and then score each manager. Funds scoring below the minimum are restricted from receiving investments, as are those that have an obvious deficiency.

There is considerable overlap in the two processes highlighted above; however, they are also quite complementary based on different financial perspectives. BNP has fixed counter-party exposure to underlying managers. Analysis of returns and other performance-related factors is more focused on mitigating risks of large drawdowns. Meanwhile, FCM is concerned not only with fraud and other abnormalities, but with performance and portfolio fit, and has a somewhat different focus when interviewing a potential manager.

In conclusion, there are three separate sets of professional investors with veto power reviewing any proposed manager for the Concert portfolio. Furthermore, all three of these partners in the due diligence process have money at risk: FCM through its franchise risk and income stream, the Strategic Investor through its investment in the Concert portfolio and BNP Paribas as the swap provider. This is a very strong process for manager due diligence and one that has worked well since the fund’s inception in 2001.