Castle Hall's DiligenceExchange: FinTech revolutionizes operational due diligence, free of charge for both investors and managers

Castle Hall is a firm we've been following since their inception in 2006. With close to 100 professionals in six countries, the company operates the industry’s largest due diligence database and is the undisputed global leader in operational due diligence (ODD), covering all asset classes across public and private alternative and traditional investments.

Like Castle Hall, Opalesque has for a long time believed that due diligence is long overdue for a FinTech makeover. We can now happily announce that the wait is over: with its new DiligenceExchange platform, Castle Hall has, again, taken the lead by solving the biggest limitations in the traditional approach to ODD.

In this inaugural BRIGHT MINDS episode, we are zooming in on Chris Addy, Founder and CEO of Castle Hall, who explains how – after Castle Hall’s migration to a digitized diligence platform over the past decade – DiligenceExchange (DXC) is the logical and much needed technological quantum leap in operational due diligence. He also explains the authoritative benefits for both investors and investment managers / GPs – starting with the perk that DXC Transparency Reports are free!

From Standardization, Verification to Revolutionary Industry Benchmarks & Analytics

ODD has become duplicative, inefficient – and costly. Managers / GPs consistently report that two thirds or more of investor DDQ / RFP requests overlap and duplicate the same topics. Yet each different spreadsheet or online questionnaire takes manager IR teams hours to complete. Multiple investors asking for the same information, but in slightly different ways, simply adds expense and delays the investment process for all sides.

DiligenceExchange functions as a utility where managers and investors use the same framework to share reference information, needed as part of every due diligence review, in a standard format.

DiligenceExchange is not, however, just a web DDQ platform which simply transfers a manager's / GP's information to investors. Castle Hall conducts their own due diligence work, including “trust but verify” anti-fraud checks such as service provider verifications.

For asset managers, DiligenceExchange (DXC) brings new efficiency to the due diligence process, delivering a consistent, verified diligence package to investors (the “DXC Transparency Reports”). More than 100 managers / GPs – representing more than $10 trilion in assets under management – are already part of the DXC Transparency initiative.

For allocators, DXC Transparency Reports enable in house teams to move up the value chain to focus on higher value questions which impact the investment decision – not core data gathering and verifications. DiligenceExchange Transparency Reports are completely free of charge for both managers and allocators.

DiligenceExchange Premium

Investors / LPs can subscribe to the Premium level of DiligenceExchange, which gives access to the firm’s entire database of more than 2,500 funds and allows unlimited additions of new managers and fund entities.

The core benefit of a standardized approach to ODD is the ability to create, for the first time, industry wide benchmarks and analytics.

Premium Insights: The due diligence process is much more efficient when it is supported by evidenced data around, for example, how frequently do asset managers form a valuation committee, appoint independent members to a fund board, or how often investors will see asset managers displaying nepotism risks through the employment of family members.

At a fund level, Castle Hall uses proprietary algorithms to identify risk factors for each current or proposed investment across 200 flags – such as a rapid increase in assets under management, a change in administrator, or a high allocation to Level 3 securities.

At a portfolio level, DiligenceExchange Analytics allow investors to see the aggregate operational risk profile of their portfolio. Across all invested funds, how many have a qualified audit opinion? How many managers fail to disclose details of the management company’s ownership structure?

Addy believes the DiligenceExchange Benchmarks represent Castle Hall's most important value add, allowing investors to compare individual managers and funds, and their aggregate portfolio, to industry-wide benchmarks. For the first time, investors can move beyond opinion to compare their investments to asset managers in the entire coverage universe which display particular risk characteristics. DXC Benchmarks bring long overdue transparency, enabling evidenced, data driven decision making.

In sum, using technology and "co-sourcing" due diligence with over 200+ other Castle Hall clients, the firm helps investors move up the diligence value chain, allowing in-house teams get to unparalleled analytics and benchmarks and to start their specific and unique value-add due diligence process already halfway through, and not waste time with basic, manual information gathering.

In this video, Chris Addy also explains:

• How Due Diligence has evolved since 1997 and technological capabilities and digitization have redefined industry leadership in Due Diligence
• How Castle Hall’s new DiligenceExchange fixes the three biggest limitations with traditional ODD
• What’s really Best Practice?
• How DiligenceExchange contributes to a major, industry wide upgrade in Best Practices across all alternative asset classes and helps get capital to work more quickly.

Chris Addy, President & CEO Castle Hall | CFA FCA

Chris is the Founder and CEO of Castle Hall, where he leads a team of almost 100 professionals conducting operational, ESG, risk and cyber due diligence on behalf of 200+ asset owners worldwide.

Chris is one of the industry’s very first operational due diligence professionals. After audit experience with both Deloitte and PwC, Chris began his due diligence career in 1997 with the Atlantic Philanthropies (a multi billion dollar foundation and early hedge fund investor). Chris then joined UBP (2001) and co-founded Amber Partners (2004).

Chris is an advocate for enhanced best practices across the asset management industry. In addition to his work at Castle Hall, Chris served for 6 years as a member of the CFA Institute Capital Markets Policy Council, acting as Chair for a maximum three-year term.

Castle Hall is a firm we've been following since their inception in 2006. With close to 100 professionals in six countries, the company operates the industry’s largest due diligence database and is the undisputed global leader in operational due diligence (ODD), covering all asset classes across public and private alternative and traditional investments.

Like Castle Hall, Opalesque has for a long time believed that due diligence is long overdue for a FinTech makeover. We can now happily announce that the wait is over: with its new ...more