Provide an example per asset class of your benchmarks, objectives, incentives/controls and reporting requirements that would typically be included in your managers’ appointment.
Private Advisors has developed and utilizes a proprietary ESG Scorecard to identify both risks, a practice consistent with the Firm's focus on mistake avoidance, as well as to identify value drivers, which is consistent with the Fund's focus on business building. Private Advisors also incorporates ESG considerations as one of 23 items on its Investment Scorecard and, as mentioned above, implemented an ESG Scorecard as part of its investment due diligence in 2015, which is shared with all members of the Primaries Investment Team.
The benchmarks include (1) signatory to recognized RI standard, (2) willingness to acknowledge the importance of ESG through side letters, and (3) the ESG Scorecard
Incentives and controls
Provide additional information relevant to your organisation`s appointment processes of external managers.
Private Advisors believes it has a robust and thorough manager selection process, tailored to the unique underwriting requirements of investing in small (<$500MM) private equity funds, including first time funds. In brief, due diligence begins with sourcing to identify and access promising managers early, then determining if the investment process is robust and repeatable by quantifying the investment risks and mitigants, and then confirming alignment, governance and controls.
A dedicated Operational Due Diligence ("ODD") team separately underwrites the governance, control environment and risk management of prospective underlying managers. Private Advisors' operational due diligence process is conducted by the Firm's dedicated operational due diligence professionals as well as third party firms that conduct background checks. This includes a review of the operations, accounting and business management, as needed, to understand and assess the fund manager's operational infrastructure and control environment. Private Advisors also uses independent service providers (BackTrack and/or Financial Risk Mitigation) to conduct key individual and entity level background checks for underlying fund managers that include, but are not limited to, critical investment professionals (often tied to the Key Person provision in the legal documents), principals and Chief Financial / Chief Operating Officers.
The Operational Due Diligence has an investment veto if it finds insufficient governance, internal controls and/or other operational issues. The findings from the ESG Scorecard and ODD team are recorded in a template/report, and also summarized in the final investment memo, which is reviewed by the Investment Committee as part of the investment decision process.
The Private Equity Investment Committee functions in accordance with Private Advisors' Investment Policy and Procedures guidelines, including a right of veto by the ODD Team. Voting procedure and scope of the Investment Committee's role is governed by Private Advisors' Investment Committee Charter and Operating Agreement.