A robust due diligence process goes a long way towards identifying bad actors, misalignments, weak internal systems, and inappropriate return expectations. In this opinion piece from Institutional Investor, the author talks about the importance of trust throughout the due diligence process. Far too often, allocators accept non-specific answers or get stonewalled behind proprietary information. Why do allocators accept such answers during the diligence process and ultimately increase risk? The due diligence process should be the optimum example of “trust but verify.” We don’t have to name names to remind everyone that 2022 was a year in which several high-profile investors were revealed to have made major investments based on trust without verifying.
As we ring in the new year, it is once again time for the annual tradition of resolutions. In this edition of Chronicles, we highlight a handful of resolutions we believe are worthy of keeping. To paraphrase everybody’s favorite finance quote machine, Warren Buffett, last year was a period where the tide went out and we discovered who was swimming . . . well, we’ll let you look up the rest of the quote. If you found yourself swimming with those investors last year, then 2022 was probably an even worse experience for your portfolio. With nearly all major central banks aggressively raising interest rates throughout 2022, bond prices plummeted and stock valuations came back to earth. The year was a perfect storm for left tails, drawdowns, and overall losses. If you are starting 2023 knowing you still have some resolutions to make and want to keep avoiding the same mistake again, then we’ve got you covered.