Operational Due Diligence: A Guide for Asset Managers

Operational due diligence, often shortened to ODD, is the review investors run on an investment manager's non-investment functions, from trade settlement and valuation to compliance, cybersecurity, and third-party service providers. Separate from investment due diligence, ODD asks whether a firm's operations can be trusted with capital, and its findings often decide whether an allocation moves forward.

For asset managers raising capital, operational due diligence is where deals stall or die on details that have nothing to do with returns. This guide explains what ODD reviews, how it differs from investment due diligence, what the ODD questionnaire covers, and how to prepare so a review speeds up your fundraise instead of slowing it down.

What is operational due diligence?

Operational due diligence is the process an allocator uses to assess the operational infrastructure and non-investment risks of a fund manager before and during an investment. Where investment due diligence evaluates strategy, track record, and portfolio construction, ODD evaluates everything that supports the strategy: fund administration, valuation policy, counterparty and cash controls, regulatory registration and compliance, business continuity, cybersecurity, key-person risk, and the quality of service providers. A strong strategy run on weak operations is exactly the kind of risk a fiduciary allocator is paid to catch, which is why registered advisers face scrutiny from bodies such as the U.S. Securities and Exchange Commission.

ODD is conducted by pension plans, endowments, funds of funds, consultants, and family offices, usually before an initial allocation and then on a recurring basis afterward. A single operational red flag, such as an unclear valuation process or a self-administered fund, can end a manager's chances no matter how good the returns look.

Operational due diligence vs investment due diligence

The two reviews run in parallel but answer different questions and are often handled by different teams on the investor side. The table below shows how they compare.

The key point for managers is that ODD carries an independent veto. A team can love your strategy and still walk away because your operations did not clear their bar. Treating ODD as a box-ticking afterthought is the most common and most expensive mistake in a fundraise.

What the operational due diligence questionnaire covers

Most ODD starts with a written questionnaire, and many allocators build theirs on a standard such as the ILPA Due Diligence Questionnaire, then layer their own questions on top. A typical operational due diligence questionnaire spans the following areas.

Firm, governance, and key personnel

Ownership structure, organizational chart, key-person coverage, succession planning, and any past litigation or regulatory actions. Allocators want to know the business survives the loss of a founder and that incentives are aligned.

Valuation and fund administration

Who values the portfolio, how often, using what pricing sources, and whether an independent administrator strikes the NAV. Self-valuation and self-administration are two of the fastest routes to a failed review.

Compliance, controls, and cybersecurity

Regulatory registrations, the compliance manual, personal trading policy, cash movement and counterparty controls, business continuity, and a cybersecurity program that increasingly must map to a recognized framework. This is also where investors probe how you use and govern AI in your workflows.

Service providers

The administrator, auditor, prime broker, custodian, and legal counsel, plus the manager's own oversight of them. Recognized, independent providers reassure allocators; obscure or affiliated ones invite deeper questions.

How to prepare for operational due diligence

The managers who clear ODD quickly are not the ones with the fanciest operations; they are the ones who can produce accurate, consistent, well-evidenced answers fast. Three practices make the difference.

Maintain a governed answer library

Keep every approved ODD answer in a single content library with a named owner and a review date, so the recurring questions on every due diligence questionnaire are answered once and reused. The same content serves the ILPA DDQ, an allocator's custom ODD questionnaire, and the annual refresh, so your team reviews rather than rewrites.

Keep answers consistent across investors

ODD teams compare notes and revisit last year's responses. An answer about your valuation policy that reads one way for one investor and differently for another is exactly the inconsistency a reviewer is trained to flag. A single source of truth keeps every response aligned and defensible.

Route new questions to the right owners

When an allocator asks something new, route it to the compliance, operations, or technology owner who can answer it, with a deadline and an approval gate, then feed the approved answer back into the library. Over a few reviews, the share of questions you have to write from scratch drops toward zero.

Turn operational due diligence into a repeatable workflow

For asset management teams that field ODD questionnaires all year, the work is repeatable by design, and it should be treated that way. RocketDocs turns operational due diligence responses into an audit-ready workflow backed by private AI that drafts from your approved answers inside your own environment and never sends sensitive fund information to a public model. Book a demo built around your real DDQs and see how much of the next ODD review your team never has to write again.