Intertrust N : How to navigate the brave new world of virtual due diligence

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At a recent panel hosted by Intertrust Group, investment experts discussed the pros and cons of virtual due diligence - and whether virtual meetings are here to stay

Virtual due diligence can save investment managers and allocators huge amounts of resources and budget. It can also help create more diverse firms, according to speakers at an Intertrust Group event.

Virtual meetings are here to stay, investment experts agreed, but face-to-face meetings are still important for building relationships and trust.

• Lilly C Knight, managing director and co-head of investment management at K2 Advisors;
• Cynthia DiBartolo, founder and chief executive of Tigress Financial Partners; and
• Li (Summer) Zhao, investment director, Office of Investments at Lafayette College,

took part in the second of our Distilled Insights events, which cover topical issues in the funds space.

The panel discussed how virtual meetings have created time efficiencies within due diligence processes, and how the flexible working environment has benefited young employees and women. It also touched on Institutional Allocators for Diversity, Equity & Inclusion (IADEI) and some pitfalls of technology. IADEI is a consortium of asset owners who seek to drive diversity, equity and inclusion across the investment management industry.

A brave new world of virtual meetings

Speakers agreed that at the start of the pandemic, it was difficult to cope with the loss of face-to-face meetings. Knight admitted her firm temporarily stopped hiring new managers, but realised "if the FDA [US Food and Drug Administration] can approve drugs, we can approve managers."

She added: "We spent much more time on Zoom. The technology made it possible."

Zhao said doing virtual due diligence and making decisions without meeting a manager in person was initially difficult and uncomfortable. So, her team only made commitments to managers they had met previously.

But they soon changed their investor perception and adapted their process. "We did more extensive reference calls and had more back-and-forth with managers," she said. "Now we can get back on the road again and meet in person. But we will definitely continue with Zoom as it's very time and resource efficient and it's benefitted all of us."

DiBartolo said that in the alternatives space, "more integration and use of technology" was a long time coming.

"I don't think [virtual meetings] are going to go, because it's an incredibly efficient way for managers to scale," she said. According to DiBartolo, trying to raise capital can be time-consuming and costly for managers, as they meet hundreds of allocators.

The Virtual Influencers: Allocators' Brave New World of Remote Due Diligence event, moderated by Susan Barreto, editor of Alternatives Watch, took place on 30 March in New York.

Virtual meetings are a boon for women and younger talent

The panel reflected on how virtual due diligence in both the cap intro and investment side had particularly helped women; this working model saves time from travelling and allows for greater schedule flexibility, while virtual meetings still enable connectivity with colleagues on a global scale.

Knight said virtual meetings gave women more flexibility over working hours, being able to work from home and not travel. About a fifth of her time turned into "travel days" doing due diligence globally and client work before the pandemic, so having some of that back is beneficial.

From a manager's perspective, DiBartolo said the increase in virtual meetings - and subsequent cost reductions - is a "democratisation of capital", which benefits female-led and diversity-led managers.

Zhao pointed to IADEI's work as an example of how the virtual environment supports diverse hiring.

"They bring on a lot of diverse managers to present in front of asset allocators, [particularly] endowment foundations, on a regular basis," she said. The sessions are accessible, often held virtually at lunch-time. IADEI also has a database where allocators can search for and contact a manager.

Knight highlighted how useful and accessible virtual meetings are for younger employees, as they can observe quietly and learn the ropes.

"We do so many client meetings in a conference room - that's very formal. By dialling into the meeting, you can learn what the clients are asking and what their needs are," she said.

"You can also go to a cap intro virtually first, just listen quietly, and then maybe go to a face-to-face one and start networking."

She added: "This gives younger people much more insight into what used to happen behind closed doors, where it's only reserved for senior people."

Looking into the future of virtual due diligence

The panel concluded that a hybrid world was emerging, which blended virtual and face-to-face meetings. This meant companies could enjoy the cost and time savings of technology but still meet in-person to build trust and to network.

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• Intertrust Group powers businesses to succeed with its world-leading corporate, funds, capital markets and private wealth services.
• Intertrust Group is committed to championing diversity, equity and inclusion in all aspects of its work and supply chain.
• Intertrust Group is a publicly listed company with 70 years' experience providing world-class services to clients around the world.