Which sources are preferred during the reference review phase of due diligence?

During the reference review phase of due diligence, existing clients of the fund are considered the preferred sources because they can provide direct insights into their experiences with the fund manager and the management of the fund itself. They can share valuable information about performance, communication, transparency, and the overall level of satisfaction with the services received. This firsthand perspective helps potential investors gauge the reliability and effectiveness of the fund manager in real-world scenarios.

Existing clients offer a unique vantage point since they are actively using the fund's services and can speak to both the strategies implemented and the outcomes achieved. Their feedback can reveal aspects such as the manager's responsiveness to challenges, quality of client service, and adherence to the stated investment objectives. This is information that may not be available from other sources, making it particularly valuable during the due diligence process.

In contrast, while regulatory bodies and outside service providers can provide certain types of validation or data, they may lack the nuanced understanding of the day-to-day relationship or the specific performance implications experienced by actual clients. Competitors might provide a biased perspective, often focusing on their own strengths rather than a balanced view of the fund being assessed. Thus, information from existing clients is seen as more reliable and insightful during this critical phase of due diligence.