Fund Manager Due Diligence

The Manager's Role:
Fund managers don't just collect your money—they make investment decisions, manage portfolio companies, handle operations, and ultimately determine your returns. A great strategy with poor execution fails.

What Track Record Tells You:

• How the manager performs in different market conditions
• Their ability to execute their stated strategy
• Operational competence and risk management
• How they've treated investors in past funds

The Variance Problem:
In private equity and venture capital, manager selection explains more of the return variance than asset allocation. The difference between top-quartile and bottom-quartile managers is enormous—often the difference between strong returns and losing money.

Why This Matters for Golden Visa:
Your €500,000 is locked for at least 5 years. You can't fire the manager if they underperform. Choosing wisely upfront is your only protection.

1. SGOIC License Verification
All Golden Visa fund managers must be licensed by CMVM as SGOICs (Sociedade Gestora de Organismos de Investimento Coletivo). Verify this directly through CMVM's public registry—don't just trust what the fund claims.

2. Fund Registration Confirmation
Verify that the specific fund you're considering is registered and eligible for Golden Visa. Fund names and structures can change; confirm current status.

3. Previous Fund Performance
Request performance data on previous funds:

• Net returns (after fees), not gross
• Against relevant benchmarks
• Across different vintage years
• Including both successes and failures

4. Team Stability
Check how long key team members have been with the firm:

• High turnover is a warning sign
• Key person clauses in fund documents matter
• Understand who actually makes investment decisions

5. Regulatory History
Check for any regulatory actions, sanctions, or complaints through:

• CMVM public records
• Court filings (if accessible)
• News searches for the firm and key individuals

About Track Record:

• What are your net returns on previous funds? (Insist on net, not gross)
• How did your funds perform in 2020 and 2022?
• What's your longest-running fund and its current performance?
• Can you provide references from investors in previous funds?

About the Current Fund:

• What differentiates this fund from your previous funds?
• How is the current portfolio performing against projections?
• What's the current deployment status (how much invested vs. reserved)?
• What's your largest holding and its performance?

About Operations:

• Who are your service providers (auditor, custodian, legal)?
• How often do you provide investor reports?
• What's your valuation methodology?
• How do you handle conflicts of interest?

Red Flag Responses:

• Reluctance to provide specific numbers
• "Our previous fund was different, so performance isn't relevant"
• Unable to provide investor references
• Defensive reactions to reasonable questions

Serious Concerns:

• No track record (first-time fund without experienced team)
• Unable or unwilling to provide audited returns
• Regulatory actions or sanctions
• High team turnover, especially key investment professionals
• Vague answers about investment strategy or portfolio

Moderate Concerns:

• Only providing gross returns (not net of fees)
• Recent strategy changes without clear explanation
• Unusually high projected returns without credible backing
• Limited institutional investor base

Process Red Flags:

• Pressure to invest quickly
• Unwillingness to provide documentation
• Requests to wire funds before completing due diligence
• Unusual fund structures without clear explanation

Trust Your Instincts:
If something feels wrong during due diligence, it probably is. There are enough fund options that you don't need to accept concerning behavior.

Net vs. Gross Returns:
Always look at net returns (after all fees). A fund claiming "20% gross returns" might deliver 12% net after fees. Net is what you actually receive.

IRR vs. Multiple:

• IRR (Internal Rate of Return): Time-weighted return measure
• Multiple (MOIC): How many times your money came back
  Both matter. A high IRR can come from a small, quick return; a high multiple can come from a very long hold.

Vintage Year Context:
A fund started in 2009 (after the financial crisis) had favorable entry valuations. Compare performance to funds of similar vintage, not across different periods.

Benchmarks:
Compare to relevant benchmarks:

• VC funds to VC indices
• PE funds to PE indices
• Don't compare VC to public markets directly

The J-Curve:
Private funds typically show negative returns early (fees without realized gains), then improve. Don't judge a young fund by early performance. Do ask where they expect to be on the J-curve.