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• Alternative Investments

Alternative Investment Due Diligence Checklist

A practical framework for financial advisors evaluating private equity, private credit, real assets, and differentiated strategies for high-net-worth client portfolios.

As alternative investments have moved from institutional portfolios into a core allocation for high-net-worth clients, the due diligence burden on advisors has grown alongside it. Lower minimums and improved access have expanded what is available; they have not simplified what is required to evaluate it well.

Effective due diligence in alternatives is not a one-time checklist exercise. It is an ongoing discipline that protects clients, supports portfolio construction and gives advisors the conviction to stay invested through market cycles. The checklist that follows is organized around the categories advisors should evaluate before, during, and after committing capital.

Why Due Diligence Matters More in Alternatives Than in Public Markets

In public markets, transparency, daily pricing, and regulatory disclosure do much of the work for the investor. In private markets, that infrastructure does not exist. Disclosure is limited, valuations are episodic, liquidity is constrained, and manager dispersion is wide.  The gap between top-quartile and bottom-quartile outcomes is significant in private equity and private credit, and meaningful across most other private categories.

That makes manager selection the dominant driver of outcomes. Due diligence is the work that supports that selection.

Pre-Investment Due Diligence: The Core Categories

Rigorous pre-investment due diligence typically covers five areas: the firm, the strategy, the operational infrastructure, the risk profile and the terms. Each carries its own questions.

1. Firm and Team Due Diligence

Performance is a function of people, process and continuity. Evaluating the firm and team begins there.

• Track record. Has the team produced consistent results across at least one full market cycle, in the strategy being raised, not an adjacent one?
• Team continuity. What has turnover looked like at the senior investment level? Are decision-makers economically and culturally aligned with the firm’s long-term direction?
• Ownership and incentives. How is equity distributed across the partnership? Are incentives weighted toward fund performance rather than asset-gathering?
• Capacity discipline. Is the firm raising the size of fund the strategy can actually deploy, or is the fund being scaled to match a fundraising target?
• Reference depth. Have references been gathered beyond the firm’s provided list, including LPs in prior funds, former employees, portfolio company management and counterparties?

2. Investment Strategy Due Diligence

A strategy that cannot be clearly explained is a strategy that should be questioned.

• Clarity of edge. Where does the manager actually generate alpha, sourcing, structuring, operational improvement, sector specialization? Is the edge durable, or a function of recent market conditions?
• Repeatability. Has the strategy been executed consistently across vintages, or do prior results reflect a small number of outsized outcomes?
• Process discipline. How are deals sourced, screened, underwritten, and approved? Is there a clear, documented process and does it match what the team describes in conversation?
• Risk management. How does the manager define and measure risk inside the portfolio? How is downside protection built into underwriting, not just into post-mortems?
• Capital deployment plan. How long will deployment realistically take? What does pacing look like across the investment period, and what is the J-curve profile?

3. Operational Due Diligence

Operational risk is the risk most often underestimated and most damaging when it appears. It deserves a separate review track.

• Service providers. Who are the auditor, administrator, custodian and legal counsel? Are they recognized institutional providers, and how long have they served the manager?
• Valuation policy. How are illiquid positions valued, by whom and how often? Is valuation independent from the investment team?
• Compliance and regulatory posture. What is the regulatory history of the firm and its principals? Are policies, including personal trading, conflicts of interest and trade allocation clearly documented and enforced?
• Cybersecurity and business continuity. Are systems independently tested? Are there documented disaster recovery and business continuity protocols?
• Reporting and transparency. What does standard LP reporting look like? Frequency, depth and timeliness and how does the manager handle ad hoc requests?

4. Risk and Portfolio Fit

A high-quality strategy in the wrong portfolio context is still a poor allocation. Due diligence has to extend beyond the manager to the role the investment will play.

• Liquidity profile. What is the realistic lock-up, distribution pacing and secondary market for the position? Does the client’s broader liquidity stack support it?
• Leverage. What is the use of leverage at the fund and portfolio company level? How does that leverage behave under stress?
• Correlation. How will this strategy behave alongside existing public and private exposures? Does it actually diversify or simply add another leveraged equity-like position?
• Concentration. Are there sector, geography or single-position concentrations that change the risk character of the fund relative to its stated strategy?
• Tail and stress scenarios. How has the manager performed in prior periods of stress and what is the documented playbook for the next one?

5. Terms and Alignment

Terms are where philosophy becomes contract. They should be read closely.

• Management fee and carry. Are economics in line with the strategy and its peer set? Is the fee base appropriate (committed vs. invested vs. NAV)?
• GP commitment. How much capital is the GP putting alongside LPs and from what source?
• Hurdle and waterfall. Is there a preferred return? How is that structured against the strategy?
• LP rights and governance. What are the LP advisory committee rights, key-person provisions, no-fault termination and amendment thresholds?
• Side letters. Are most-favored-nation rights provided and what is the firm’s practice on disclosure of material side letter terms?

Ongoing Monitoring: Due Diligence Does Not End at Subscription

Once capital is committed, the work shifts from selection to oversight. Ongoing monitoring is what allows an advisor to identify drift early and respond, to the strategy, the team or the client allocation — before issues compound.

• Quarterly performance, attribution and exposure relative to the original underwriting.
• Changes in team composition, ownership or firm strategy.
• Operational changes, service providers, valuation policy, reporting practices.
• Pacing of capital calls and distributions relative to the original deployment plan.
• Market and sector developments that affect the original investment thesis.

Client Education: The Final, Often-Overlooked Layer

Due diligence is also a client conversation. Advisors who set clear expectations around liquidity, J-curve dynamics, valuation cadence and the range of outcomes are far more likely to see clients stay invested through cycles. Investor education, particularly around liquidity, is often the determining factor in whether an alternatives program holds up under stress.

How PPB Capital Partners Approaches Due Diligence

PPB Capital Partners has built its model around disciplined due diligence as a core function of the firm not as a feature layered on top of distribution.

Through Capital Markets Solutions (CMS), under the oversight of Chief Investment Officer Frank Burke, CFA, every strategy is evaluated against an institutional standard before it reaches the advisor community. The process integrates firm and team review, strategy diligence, operational diligence, risk and portfolio fit analysis and terms review , combined with peer collaboration from the advisory community to test conviction against real portfolio construction questions.

PPB’s Private Investments Exchange (PIX), enhanced in January 2026 through a transition to Delio, provides the operational infrastructure that allows advisors and PPB’s internal teams to focus on diligence, oversight and client conversations rather than paperwork. The result is a curated, high-conviction universe of strategies,  not an open marketplace requiring advisors to perform institutional-grade diligence alone.

Founded in 2008, PPB serves the private wealth advisory community as an extension of the investment office. The firm reported 39.3% topline revenue growth in 2024 and was named to the Inc. 5000 list of America’s fastest-growing private companies.

Build Conviction Into Every Alternatives Allocation

Strong due diligence is what turns access into outcomes. For advisors building or expanding an alternatives program, partnering with a firm that has institutionalized that discipline can free meaningful capacity for client work without compromising the rigor of the underlying selection. To learn more about PPB’s due diligence process and how it can support your practice, visit ppbcapitalpartners.com and connect with the PPB team.