Operational due diligence review

Every DDQ answer tested against Form ADV, the audits and the public record, each area rated, with red flags and conditions to invest. Every finding sourced

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DOCXXLSX15 steps

The problem

Independent administrator, says the DDQ. Form ADV asks what share it actually valued

Form ADV asks what percentage of each fund's assets someone other than the manager or an affiliate valued last year. SEC staff's answer is 100 percent when the administrator ran the valuation procedure for every asset and its values set subscriptions, redemptions, distributions and fees. An administrator that books the manager's marks on private loans is not valuing them, so they fall outside that percentage, whatever the DDQ says

The request

Project Thistle goes to our November IC for a $60 million initial allocation, and our operational due diligence review is the last gate. SEC registered credit manager, $2.6 billion, long/short credit through Delaware and Cayman feeders into one master, about a fifth in private loans and other Level 3. Work from the June DDQ, audited financials, valuation policy, administrator's SOC 1 and my onsite notes, attached. Pull the public record yourself by the SEC number in the DDQ and bring every answer current. Test each against Form ADV fund by fund, Form D and the audits. Rate each area and overall: approve, approve with conditions or veto, with red flags and conditions. Never take independent administrator at the DDQ's word.

Thistle DDQ June 2026.pdf
Thistle 2025 audited financial statements.pdf
Thistle valuation policy 2026.pdf
Thistle administrator SOC 1 Type II 2025.pdf
Thistle onsite meeting notes Sep 2026.docx

How Axe works

ApprovedChanges asked

Your reviewApprove, or say what to change

Approved or changes

Review and evidence matrixReview, matrix and verification log

Final reviewApprove the revised files

Revised review and evidence matrixRevised files and verification log

Step

Test who values the book

Prompt

Sent to the model at this step

Establish who actually values each position, fund by fund; the questionnaire's independent administrator is a claim, not evidence. Start from Form ADV: question 27 in Schedule D section 7.B.(1) gives, for each fund, the percentage of assets by value that a person other than a related person valued in the last fiscal year. SEC staff's Form ADV answers put that at 100 percent when the administrator carried out the valuation procedure for all assets and the adviser used its values for subscriptions, redemptions, distributions and fee calculations. Set the percentage beside the 2025 audit's fair value hierarchy for the same fund and year: Levels 1, 2 and 3, and within Level 3 the private loans by technique and source of inputs. Then read the valuation policy and the controls report for the same assets: which prices the administrator takes from independent sources, which it takes from the manager or the manager's model, and whether it challenges them. Read the pricing control objective word for word: a control that the administrator records prices the manager supplies is not independent valuation. Establish whether a third party valuation firm values or only reviews the private loans, how often, which positions, and whether it gives a value range or positive assurance on the manager's mark. Build the valuation table, looking through each feeder's interest to the master's book and noting where the manager reports the master and feeders together in Form ADV: for each fund, the share of its assets by value priced independently by the administrator, valued by a valuation firm and marked by the manager, against the question 27 percentage and the questionnaire's wording. Where Form ADV reports 100 percent while the administrator takes the manager's loan marks, or the questionnaire says independent while Form ADV reports less, record the contradiction as a finding with every source and say whether the questionnaire or the filing is wrong. Finish with the valuation committee: who votes, whether portfolio managers can override a price, and how overrides are logged and reported to investors.

Uses

Reconciled matrix
Public record
Audited financial statements
Valuation policy
Administrator controls report
Onsite notes

Produces

Valuation table

What you get back

DOCXOperational due diligence reviewRating and conditions first, findings by area, red flags, public record, confirmations to request

XLSXEvidence matrixEach DDQ answer against ADV, Form D, audit and public record; area scores

Verification logOpen items first, then each answer and finding marked verified, corrected or open

Make it yours

Swap in your DDQ template and rating scale, change the areas you score, or set the conditions your committee requires. Every step and every prompt can be edited

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