What is Due Diligence?
Due diligence is the comprehensive investigation an LP conducts before committing to a fund — covering investment strategy, team track record, fund terms, legal documents, operational infrastructure, and reference checks.
LP due diligence typically covers: investment strategy and differentiation, GP team backgrounds and reference checks, track record verification (audited fund financials), fund terms (fees, carry, LP protections), operational infrastructure (fund administration, cybersecurity, back-office), and legal review of the LPA and side letters.
Institutional LPs often run 3–12-month due diligence processes for new manager relationships. Shorter processes are common for follow-on funds from trusted GPs. Operational due diligence (ODD) is increasingly a separate workstream from investment due diligence.
Also known as: LP due diligence, manager diligence