Van Mac Group and Greenwich AI’s due diligence process avoids sub-prime exposure and Madoff debacle

The events of the past eight months have shown that when something sounds too good to be true, it usually is. And while you might be able to get away with it for a while, eventually it all catches up with you. But much of the heartache could have been avoided with thorough ongoing due diligence and risk management, says Van Mac Group Managing Director Scott MacDonald.

Van Mac Group partners with Greenwich Alternative Investments, LLC to offer institutional clients investable hedge fund indexes and specific style or strategy concentrations tailored to their needs, allowing clients to customise the level of risk, investment style, returns and volatility levels. It currently manages over US$100 million for local superannuation clients, whose underlying portfolios have performed well against all performance benchmarks.

Mr MacDonald attributes VanMac Group’s ongoing success to a combination of prudent investment strategies and rigorous, objective, ongoing due diligence audits of prospective and existing investment partners, both internally and with the assistance of independent third-party analysts.

“Thanks to our rigorous and ongoing risk assessment and due diligence procedures – which involve not only standard document revision procedures, but also background checks, asset verification, investigation into managers’ backgrounds, analysis of investment strategy and operations, quantitative analysis and onsite visits – we have minimised exposure for our clients to the subprime meltdown and Madoff debacle.”

Indeed, despite many other respected institutions and fund managers losing their shirts to Madoff’s scam, Greenwich AI had no direct or indirect investment with either Bernard L. Madoff Investment Securities, LLC, nor has it ever had exposure to investment pools managed by Madoff.

“We simply do not invest with any manager that does not allow us to conduct full due diligence. If we aren’t comfortable with a manager’s trading strategy and if the sources and viability of return are not verifiable, we will not invest,” stated Thomas Whelan, Greenwich Alternative Investments CEO recently. “In light of the unprecedented scope and size of the alleged Madoff fraud, this could not illustrate any more clearly the requirement for initial and ongoing professional due diligence. A fund’s large size or its manager’s reputation should never be a substitute for thorough due diligence.”

Van Mac Group also provides its clients with regular ‘Risk Dashboards’, snapshots of the risk and return for each fund in the portfolio compared with its peers in the same strategy for the most recent 12-month period. Bottom quartile statistics are highlighted, while other statistics include the Return, Volatility, Sharpe Ratio and Sortino Ratio, Maximum drawdown, and Correlation with the underlying strategy.

”Together these statistics allow investors from institutional clients to self-managed super funds to understand how their investment is performing, secure in the knowledge that we have enacted comprehensive risk management strategies,” says Mr MacDonald. “These strategies monitor manager style and strategy drift, uncover abnormal investment risks, monitor market risk, credit risk, operational risk, portfolio risk, event risk and model risk, maximizing returns irrespective of market condition.”

“We’re able to achieve this level of service for our clients at approximately 50 percent less for our clients than they currently pay by engaging wholesale fund of funds.”