Fund Selection

"It is not the strongest of species that survive, nor the most intelligent, but the ones most repsonsive to change"  -  Charles Darwin

Manager Due Diligence

The objective of our fund selection process is to identify hedge fund managers with superior investment skills that have proven to operate in an uncorrelated way through different market environments. The selection process entails three research levels a hedge fund manager will have to go through, each with its own information requirements that have to be satisfied to pass to the next research level. We look for managers with:

• Strong idea-generation and an independent mind
• Flexible investment approach
• Competitive, consistent edge in investment strategy and trading style
• Quality and integrity of the investment team
• Strong operational infrastructure and well-defined checks and balances

Operational Due Diligence

Theta puts particular emphasis on a professional due diligence on the hedge fund’s operational infrastructure complemented with external background checks by private investigators. This effort is headed by our Head of Operations & Finance, who has a strong background in forensic accounting and hedge fund administration. The objective of our operational due diligence process is to generate a transparent picture of the hedge fund's infrastructure in terms of:

• People & organization
• Fund structure, asset-liability management
• Valuation policy
• Degree and quality of independent oversight

Operational quality always needs to be assessed in the context of the investment strategy and trading style that a manager pursues. A check-box approach does not suit the ultimate objective of operational due diligence, which is to ascertain the level of operational risk, focusing on the balance between operational stability, cost consciousness and efficiency of the investment process.   Rather, Theta treats the findings as forming a mosaic where individual findings are not necessarily conclusive, but their combination provides the full picture.  Although this approach is no guarantee against operational losses, it does allow us to make well-informed investment decisions.