Catalina Partners helps investors to assess and manage underlying business risks in their portfolios. Our team designs customized solutions that support an organization’s mission and goals.

• Operational Due Diligence – Initial and ongoing risk assessments of fund managers and their service providers are performed on behalf of investors. Due diligence reviews evaluate fiduciary responsibilities, integrity of the team, and soundness of business processes and controls. Areas examined include:

- Policies and procedures
- Books and records
- Controls
- Data and infrastructure
- Regulatory compliance
- Valuation
- Service providers
- Business continuity

Observations and improvement recommendations can be used as a tool for negotiation and funding decisions; they can also be used to structure due diligence monitoring activities if and when an investment is made.

• Due Diligence Program Review – A comprehensive review is conducted to compare the due diligence program and work products to industry best practices. The review identifies gaps and develops recommendations for program enhancement. Facilitated training sessions transfer the knowledge and rollout new tools. Areas covered include:

  - Operations and compliance
  - Leverage and liquidity
  - Counterparty credit risk
  - Pre-funding diligence
  - Post-funding monitoring
  - Due diligence questionnaires
  - Site visits

• Valuation Verification – Under SFAS 157, level 3 investments should be verified independently from the fund manager. Catalina Partners assists clients by categorizing each investment, developing a methodology (data sources, models and benchmarks) for each, and executing the defined process with documentation. Key activities include:
  

  - Assess valuation policies and processes
  - Validate data sources and benchmarks
  - Verify accuracy and robustness of calculations and models
  - Compare with best practices and identify gaps
  - Remediate gaps with process and systems enhancements

• Credit Risk Monitoring – Credit exposures of each fund, fund manager and affiliated counterparties are monitored with a program based on portfolio holdings. The inventory of available sources of credit and corresponding collateral is evaluated. Stress scenarios are executed to determine areas of vulnerability. Consolidated credit reports are developed with triggers for rising levels of exposure.

• Policies and Procedures – Catalina Partners assesses the adequacy and accuracy of current policies and procedures relative to best practices and regulatory requirements. Regulations and guidelines may be promulgated by
  

  - AICPA	- ISDA
  - FASB	- California Dept. of Corporations
  - GASB	- CFTC
  - UPMIFA	- SEC
  - IRS	- FINRA

• Governance and Controls – An evaluation of the roles, responsibilities, and decision-making authority of staff, key committees (e.g., investment, endowment and audit), trustees and boards of directors compared with industry best practices is the initial step to improve the efficacy of a firm. After the review, Catalina Partners devises structural improvements that best align the organization’s culture and philosophy and that incorporate requisite control points with clear decision points and accountability.

• Real Estate Valuation and Due Diligence – Catalina Partners’ risk-based methodology identifies red flags and establishes reliable benchmarks for ongoing monitoring of real estate investments. This may include, for example, comprehensive reviews of all pertinent agreements between investment managers, investors, and service providers; testing for evidence and compliance; full documentation of our process and findings; and development of pragmatic recommendations, as warranted.

Catalina Partners helps alternative fund managers assess their front, middle and back office risks, identify mitigation strategies and implement remediation and reporting programs. Active risk management improves performance, promotes sustainability and ultimately attracts institutional investors.

 

• Start Up – For new launches, Catalina Partners provides expert guidance on the functional, regulatory and infrastructure requirements of operating a fund. We determine key processing requirements by considering investment strategies employed, number of investors, investor reporting cycles and level of client service. A new fund manager can rely on Catalina Partners to assist with the selection of third party service providers, design of organizational and functional structure, and definition of key roles and responsibilities. Catalina Partners will lead the advisor’s registration effort including the development of a customized policy and procedures manual.

• Infrastructure and Data Systems – Catalina Partners assists with the selection and implement of standard infrastructure for corporate e-mail, PDAs, corporate websites, telecom, office space, desktop computers and laptops. We also select, implement and customize vendor solutions for investor relationship management, trade order management and execution, fund and partnership accounting, statement generation, and statutory and management reporting. Catalina Partners’ team develops and tests business continuity plans to ensure stability of the infrastructure in the event of natural disaster, power shortage or other systematic failure.

• Operational and Compliance Risk Assessment (“Mock Due Diligence Review”) – Investors and regulators demand fund managers manage business and investment risks. Catalina Partners’ independent risk assessment will help a manager understand risks in the front, middle and back office through a comprehensive examination of business processes, controls, data accuracy and quality, and compliance with internal policies and external regulations. Comparisons with standards such as the President’s Working Group, AIMA and AICPA provide the basis for quantitative evaluation and measurement. Results are used to develop an improvement plan to close the gaps identified. Areas covered include:

  - Suitability and effectiveness of compliance program design
  - Adequacy and effectiveness of controls
  - Ability to anticipate and manage risks
  - Policies and procedures
  - Business continuity planning
  - Data and Systems

• Service Provider/Vendor Selection – Fund management needs should be aligned with service provider offerings for effective operations and decision making. Catalina Partners first defines business and technical requirements and then identifies a short list of qualified providers. Catalina Partners assists with RFP development, distribution and scoring to evaluate features and functions, conversion efforts, support, licensing fees and recurring fees. Functional areas include:

  - Research
  - Risk analytics
  - Prime brokerage
  - Administration
  - Regulatory compliance
  - Systems applications
  

  The selection process findings are effective tools for service level and contract negotiations.

• Policies and Procedures – Catalina Partners assesses the adequacy and accuracy of current policies and procedures relative to best practices and regulatory requirements. Regulations and guidelines may be promulgated by
  

  - AICPA	- ISDA
  - FASB	- California Department of Corporations
  - GASB	- CFTC
  - UPMIFA	- SEC
  - IRS	- FINRA

  The review will identify gaps and key decisions required to remediate the gaps. Catalina Partners will re-write policies and procedures compliant with standards and consistent with a firm’s business model. We also test and rollout a new program.

• Credit Risk Monitoring – Credit exposures of individual funds as well as aggregated funds are monitored with a program based on portfolio holdings. An inventory of available sources of credit and corresponding collateral will be evaluated. Stress scenarios are executed to determine areas of vulnerability. Consolidated credit reports are developed with triggers for rising levels of exposure. The analysis may include:
  

  - Policies and procedures
  - Credit scoring and decision making tools
  - Loss mitigation tools and techniques

• Counterparty Risk Monitoring – An assessment of current and likely future counterparty exposures are based on a review of the manager’s investment strategy, risk tolerance and trading agreements and include a quantitative analysis of credit, accounting and pledged assets. Catalina Partners maps counterparty risk concentrations and identify corresponding limits and/or mitigation strategies. Automated reports will consolidate and track key data against stated goals. An analysis may
  

  - Assess exposure aggregation process
  - Identify counterparty trading agreements
  - Loss mitigation tools and techniques - Design and implement counterparty health monitoring tool
  - Develop exception-based reporting system

• Collateral Management – Firms active in derivatives trading at a minimum need to record pledged collateral, manage valuation fluctuations, and anticipate expirations. Catalina Partners assesses current processes, identifies improvements based on best practices and formulates a plan for implementation. Low cost solutions may include automation of Excel spreadsheets, automated data uploads/downloads, and use of Microsoft SharePoint. Collateral management systems provide more robust solutions.

• Fraud Monitoring and Investigation – Identification of key fraud risks within an organization, and to design an effective control framework that detects, mitigates, prevents and deters those risks. This would include development of a tailor-fit solution so to enhance an organization’s internal monitoring techniques and the integrity of its financial reporting, while simultaneously reducing its business and operational risks.

Law Firms

• Litigation Support – Catalina Partners experts analyze accounting and business records to uncover relevant facts and insights for dispute or pending litigation. We assist clients and their attorneys with understanding complex financial instruments/transactions and provide contextual information such as market activity, cyclical patterns and industry best practices. Forensic techniques and statistical analysis are used extensively to uncover key findings. All phases of dispute resolution are supported from case theory development to expert testimony.

  - Tracing and recovery of assets
  - Fraud investigation
  - Evaluate compliance with regulatory requirements
  - Data and trading analyses
  - Valuation analysis
  - Books and records surveillance (e.g., e-mail)
  - Fiduciary responsibility standards
  - Expert testimony

• Fund Dissolution– Members of the Catalina Partners assists with the orderly wind-down of a manager’s operations, financial/real assets, and staff. We manage day-to-day obligations and execute on a dissolution checklist through to completion. Catalina Partners team members may serve as acting COO, CCO, CFO, and CTO or as directed by counsel. Daily and weekly status reports detailing progress against plan, completion of milestones, issues outstanding, inter-dependencies, and delegation of assignments are maintained.

Prime Brokers

• Controls Assessment (“Mock Due Diligence Review”) – Independent Catalina Partners experts will conduct an assessment of operational controls in key functional areas such as trading, settlement, cash management, credit, stock loan, custody and reporting. The results are compared to AIMA Sound Practices for Prime Brokers. Risk areas are identified and recommendations developed to remediate gaps and manage risks.

• Vendor Selection – Fund management needs should be aligned with service provider offerings for effective operations and decision making. Catalina Partners first defines business and technical requirements and then identifies a short list of qualified providers. Catalina Partners assists with RFP development, distribution and scoring to evaluate features and functions, conversion efforts, support, licensing fees and recurring fees. Functional areas include:

- Risk analytics
- Order management
- Portfolio accounting

The selection process findings are effective tools for service level and contract negotiations.

Fund Administrators

• Controls Assessment (“Mock Due Diligence Review”) – Catalina Partners conducts an assessment of operational controls in key functional areas such as investor reporting, market data, fund accounting, allocations and reconciliation. The results are compared to AIMA Sound Practices for Hedge Fund Administrators. Risk areas are identified and recommendations developed to remediate gaps and manage risks.

• Vendor Selection – Fund management needs should be aligned with service provider offerings for effective operations and decision making. Catalina Partners first defines business and technical requirements and then identifies a short list of qualified providers. Catalina Partners assists with RFP development, distribution and scoring to evaluate features and functions, conversion efforts, support, licensing fees and recurring fees. Functional areas include:

- Allocations
- Order management
- Portfolio accounting

The selection process findings are effective tools for service level and contract negotiations.