Hedge fund due diligence questionnaire (DDQ): sections, templates and answers

An operational due diligence analyst at a pension fund opens a long Word file from a hedge fund she has never met. It names the people who own the management company, the firm that values the portfolio, the bank that holds the cash and the two signatures needed to move it. It says whether the SEC has ever sent the firm a deficiency letter. Before anyone from the pension fund visits the manager, this file, the hedge fund due diligence questionnaire, sets the agenda for the visit.

A hedge fund due diligence questionnaire (DDQ) is a standard set of written questions that a fund manager answers about its firm, strategy, operations, risk controls, compliance and terms, so that investors can assess the fund and compare it with others. The manager writes the answers. Allocators, meaning pension funds, endowments, foundations, insurers, family offices, funds of funds and investment consultants, send the questions or accept a completed standard version.

The wider review that follows the questionnaire, from reference calls to fee and redemption terms, is covered in our guide to hedge fund due diligence.

Who writes the DDQ and who sends it

The questionnaire travels in two directions. Managers usually keep a completed standard DDQ, often built on the AIMA template, and send it to any serious prospect. Many allocators send their own questionnaire and expect it to be filled in their format.

The custom version is more common. Of 173 fund managers questioned in 2021, 63% of them based in North America and the rest in Asia-Pacific and Europe, 97% had received at least one custom DDQ. The managers estimated that about a third of their investors accepted a standard DDQ, 23% accepted one with extra questions attached, and 59% required their own questionnaire to be completed. Among managers with 1 to 10 billion dollars under management, 12% received between 100 and 500 RFP and DDQ requests a year. In the 10 to 50 billion dollar range the share was 40%.

Inside the fund, investor relations staff usually run the process. The chief operating officer, chief financial officer and chief compliance officer write the operational and regulatory answers, the portfolio managers describe the strategy, and legal counsel reads the final text against the offering memorandum. Much of the work runs through software: AIMA licenses its templates to platforms including Dasseti, DiligenceVault, CENTRL, Orbit Diligence and AlphaPipe, which check that the user belongs to an AIMA member firm before giving access.

The standard DDQ templates: AIMA, ILPA and PRI

Custom questionnaires draw on a handful of published templates, each written for a different reader.

The AIMA DDQ

The Alternative Investment Management Association published its first DDQ, for investors vetting hedge fund managers, in 1997, after investors asked for a standard set of questions. It has since become the industry template for hedge funds. Since 2017 it has been modular: a manager assembles the modules that fit its business, and a short decision tree of three to five questions picks the right combination.

The 2025 modules fall into three groups:

• The manager: an overview module, governance of the investment manager, and operations and risk management.
• The strategy: trading strategies, corporate lending, private markets, funds of funds, and models and systematic trading.
• The product: open-end private funds, closed-end private funds and managed accounts, with open-end and closed-end modules for up to five funds each.

Short-form versions condense the three manager modules and the open-end fund module into fewer questions, and a separate responsible investment DDQ stands on its own. AIMA has also published specialist questionnaires on cyber security, data protection, alternative data, outsourcing, diversity and inclusion, and fund directors.

The 2025 edition was presented in March 2025 as a soft launch, with member feedback due by September 15 and final versions before the end of the year. It added more than 100 questions across the modules, but most users moving from the 2017 or 2019 editions will see a net reduction in the number of questions they answer. The main changes:

• reworked questions on performance presentation, outsourcing and technology risk, counterparty risk, leverage, liquidity risk management, anti-money laundering and expense disclosure
• a new private markets strategy module
• technology and fund director questions moved into the main modules, where they previously sat in separate questionnaires
• trading questions split out of the operations and risk management module

The ILPA DDQ

ILPA wrote its questionnaire for private equity. Its sections on firm governance, succession, compliance, data security, ESG and diversity apply to any manager. Those on co-investments, GP-led secondaries and credit facilities are specific to private equity. Version 1.2 from 2018 is still online, but ILPA replaced it with DDQ 2.0 in November 2021. The 2.0 template runs to 58 pages and 20 sections, from firm information and succession planning to credit facilities, GP-led secondaries, data security, ESG and diversity, followed by an appendix listing 89 documents the manager is asked to supply, starting with the limited partnership agreement.

The PRI hedge fund DDQ

The PRI responsible investment DDQ for hedge fund investors, dated April 2025, covers only ESG. It asks about firm-level policy and oversight, how the approach applies to each strategy, sustainability outcomes, climate data and disclosure. It also asks how the responsible investment policy treats short selling, leverage and derivatives, tools that most long-only funds do not use. An appendix maps the questions, fully or partly, to indicators in the PRI's 2024 reporting framework, so a signatory can reuse answers from its annual PRI report.

Operational DDQ and investment DDQ

Large allocators split the review between two teams, and the questionnaire splits with them. The investment team reads the strategy, portfolio construction, risk limits and track record. The operational due diligence team reads everything that decides whether investors receive the returns: ownership, governance, valuation, cash controls, service providers, compliance and technology. The AIMA structure reflects the division, with manager modules on governance and operations kept apart from the strategy modules. Some allocators send two separate questionnaires, one for each team.

The operational questions trace back to how hedge funds have failed. About half of catastrophic hedge fund failures stemmed from operational risk factors, many of them rooted in how positions were valued.

Section by section: what a hedge fund DDQ asks

Section names and order vary between templates, but the same subjects recur in the AIMA template, in ILPA 2.0 and in the custom questionnaires built from them.

Firm, ownership and governance

The opening section asks for the legal structure of the management company and the funds, the owners and their percentages, the organization chart, any changes of ownership and why they happened, and the governance bodies that oversee the manager. For offshore funds it asks who sits on the fund board and how many other boards each director serves on. An allocator reads this section to see who, if anyone, can overrule the portfolio manager.

Team, key persons and succession

Biographies of the principals and senior staff, headcount by function, departures over the past few years and the reasons for them, how people are paid, and what happens if a named key person leaves or dies. ILPA gives succession planning its own section. Allocators compare the list of departures with the biographies in earlier DDQs and marketing decks, and check whether the fund documents give investors a right to redeem when a key person goes.

Investment strategy and process

What the fund buys and sells, where ideas come from, who approves a position, how the portfolio is built and sized, and what limits apply. The question behind this section is whether the process described matches the positions the fund held. Allocators test it against exposure reports and past drawdowns.

Risk management, leverage and liquidity

The questions cover:

• who runs risk, and whether that person reports to the portfolio manager or to someone else
• position, sector, country and gross and net exposure limits, and what happened the last time one was breached
• how leverage is measured and capped
• stress tests and scenario analysis, and how often they run
• how long it would take to sell the portfolio, set against the fund's redemption terms

Leverage and liquidity risk management were two of the areas AIMA rewrote in 2025.

Trading, counterparties and service providers

Which prime brokers, executing brokers, custodians, administrator, auditor and legal counsel the fund uses, and how long it has used them. How trades are allocated between funds and accounts, how errors are handled, who can instruct a cash transfer and how many signatures that takes. AIMA moved the trading questions into a module of their own in 2025.

Valuation and fund administration

Who calculates net asset value, what share of positions the administrator prices independently, where prices come from for illiquid holdings, who sits on the valuation committee and whether the portfolio managers can override a price. ILPA asks separately whether the firm obtains an SSAE 18 or ISAE 3402 report on its own internal controls and receives such reports from its key service providers.

Compliance, regulatory history and anti-money laundering

Registrations, the compliance manual and code of ethics, personal trading rules, handling of material non-public information, political contribution policies, whistleblower protection, regulatory exams and any deficiency letters, litigation, and insurance. AIMA reworked its anti-money laundering questions in 2025. FinCEN adopted a rule that brings registered investment advisers and exempt reporting advisers under the Bank Secrecy Act, then postponed its effective date from January 1, 2026 to January 1, 2028.

Technology, cybersecurity and business continuity

The ILPA template asks whether the firm had a cyber breach in the past five years, whether it runs penetration and vulnerability tests, whether an independent party audits its security policy every year, whether sensitive data is encrypted at rest and in transit, and how data held by third parties is reviewed. Business continuity and disaster recovery plans follow. For SEC-registered advisers these answers now sit next to a regulatory duty: the 2024 amendments to Regulation S-P require an incident response program and notice to affected individuals within 30 days of learning of unauthorized access to customer information.

Fund terms, fees and alignment of interests

Management and incentive fees, hurdle rate and high-water mark, expenses charged to the fund, lock-ups, notice periods, gates, side pockets, side letters and most-favored-nation clauses. Then the alignment questions: how much the principals have invested in the fund and whether they can redeem on better terms than other investors. Our explainer on hedge fund fees covers the mechanics behind the fee answers.

Performance and track record

Monthly net returns since inception, how they are calculated, whether the auditor or administrator has verified them, performance of each share class, assets under management over time, and any earlier track record the manager claims from a previous employer. AIMA reworked its questions on performance presentation in 2025.

ESG and responsible investment

Whether the firm has a responsible investment policy and who oversees it, which exclusions apply, how ESG factors enter position sizing, how the firm votes and engages with companies, whether it measures portfolio emissions, and what it discloses. The PRI hedge fund questionnaire adds a document checklist, from the stewardship and proxy voting policies to exclusion lists and sample research that covers sustainability. ILPA 2.0 took its ESG section from the PRI questionnaire for private equity investors.

Diversity, equity and inclusion

ILPA gives diversity its own section, section 20, and pairs it with a Diversity Metrics Template that collects data on ownership, the investment committee and staff. It asks whether the firm has signed ILPA's Diversity in Action initiative, whether it tracks diversity metrics and whether it has policies such as a DEI policy, and for anything missing, whether it plans to adopt it within 12 to 18 months. ILPA added a separate DEI Monitoring Questionnaire in 2023 for ongoing checks. The PRI invites investors to add questions from its own DEI questionnaire, and AIMA publishes a diversity and inclusion DDQ as well.

Evasive and specific DDQ answers compared

The answers below are illustrations written for this page. In each pair, the specific version gives names, numbers or dates that an allocator can check against another document.

Several patterns in DDQ answers draw follow-up questions:

1. "See the offering memorandum" as the whole answer to a question the memorandum does not address.
2. Text lifted from the marketing deck, with adjectives in place of numbers.
3. N/A with no reason. The ILPA user guide asks managers who skip a detailed question to explain briefly why.
4. Names or figures that differ from the manager's Form ADV, its audited accounts or an earlier DDQ.
5. An old date on the cover, or no date.

Checking DDQ answers against Form ADV and public records

Much of the operational section can be checked without the manager's help. Since the SEC's 2011 rule changes, advisers to private funds must name five kinds of gatekeepers for each fund in Form ADV: auditors, prime brokers, custodians, administrators and marketers. Form ADV also carries disciplinary history and is public, both for registered advisers and for exempt reporting advisers, through the SEC's Investment Adviser Public Disclosure site.

Allocators usually run these searches alongside the DDQ:

• Investment Adviser Public Disclosure for the firm's Form ADV, its private funds and service providers, and disciplinary disclosures
• FINRA BrokerCheck for individuals with a broker-dealer registration history
• NFA BASIC for firms and people registered with the CFTC, such as commodity pool operators and commodity trading advisors
• PACER for federal lawsuits and bankruptcies involving the firm or its principals

The service providers named in the DDQ are then contacted directly, so that the administrator and auditor confirm their own roles in writing.

How the DDQ fits with on-site visits and background checks

The questionnaire is an early step in due diligence. Investors use the answers to decide where to dig and to cross-check other sources. The usual sequence runs:

1. Screening on returns, strategy and assets in a database or consultant report.
2. The DDQ, standard or custom, with the documents it asks for: offering memorandum, audited accounts, compliance manual, valuation policy, Form ADV.
3. Follow-up questions in writing, drawn from gaps and inconsistencies in the answers.
4. The on-site visit, where the operational team meets the COO, CFO and chief compliance officer, watches a trade move from order to reconciliation, and asks to see the documents and systems the DDQ describes.
5. Background checks on the principals, often run by a specialist investigations firm: identity, education and employment claims, litigation, regulatory records, bankruptcies and media coverage.
6. Calls to the administrator, auditor and prime broker, and reference calls with current investors.
7. A written report to the investment committee.

Investors using the ILPA template are asked to read the detailed answers and their own follow-up questions before deciding, since the yes or no boxes only flag issues. Extra questions go in a separate document, so that the standard template stays comparable across managers.

DDQ answers fall under the antifraud rules

DDQ answers are statements made to investors and prospective investors. Rule 206(4)-8 under the Investment Advisers Act makes it unlawful for an adviser to a pooled investment vehicle to make an untrue statement of a material fact, or to leave out a material fact, when dealing with an investor or a prospective investor in the fund.

In May 2012 the SEC charged Quantek Asset Management, the Miami adviser to the 1 billion dollar Quantek Opportunity Fund. From 2006 to 2008 Quantek had told investors, in answers to specific due diligence questionnaire questions, that its principals had money in the fund. None of them had invested. The SEC also found backdated loan documents and backdated investment approval memos. Quantek, its lead executive, its former parent company and its operations director agreed to pay more than 3.1 million dollars in disgorgement and penalties, and the two individuals accepted industry bars of five years and one year.

How often a DDQ is updated

AIMA's questionnaire went from its first edition in 1997 to a modular format in 2017, a 2019 revision and the 2025 edition. ILPA moved from version 1.2 in 2018 to 2.0 in 2021 and updates its user guide periodically. The PRI hedge fund questionnaire is due for periodic revision as the PRI reporting framework changes.

Registered advisers must amend Form ADV at least once a year, within 90 days of the end of the fiscal year, and more often when the form's instructions require it. Owners, service providers and disciplinary history appear in both documents, so the DDQ has to match the latest Form ADV. Beyond the annual Form ADV amendment, these events change DDQ answers straight away:

• a key person leaving or a change of ownership
• a new administrator, auditor, prime broker or custodian
• a regulatory exam, deficiency letter, enforcement action or lawsuit
• a cyber incident or a breach of a risk limit
• new rules that change a compliance answer, such as the adviser anti-money laundering rule when it takes effect in 2028

Investors also use the questionnaire after they invest. The PRI suggests its questions for manager monitoring as well as selection, and a new DDQ read beside the previous one shows what changed at the manager in between. Our pages on multi-manager hedge funds and on starting a hedge fund cover the fund structures and service providers that these answers describe.

This article is general information, not investment advice.

Frequently asked questions

What is the difference between a DDQ and an RFP?

A request for proposal asks several managers to describe their capabilities and terms so an investor can choose between them. A due diligence questionnaire examines one manager in depth before money is committed or renewed: ownership, controls, service providers, regulatory history and terms.

Is there a free hedge fund DDQ template?

The AIMA questionnaire, which most hedge fund DDQs follow, can be downloaded only by AIMA members or used through platforms that AIMA licenses. Two widely used templates are free: the ILPA DDQ 2.0, written for private equity funds, and the PRI responsible investment DDQ for hedge fund investors, which covers ESG questions only. Many allocators also write their own questionnaires on top of these.

Who fills out a hedge fund DDQ?

The manager does. Investor relations or marketing staff usually coordinate the document, the chief operating officer, chief financial officer and chief compliance officer supply the operational and regulatory answers, the portfolio managers describe the strategy, and legal counsel reviews the result before it goes out, because the answers must match the offering documents and are subject to the antifraud rules.

Can a manager refuse to answer a DDQ question?

Yes, with a reason. Under the ILPA guidance, managers do not have to disclose sensitive information, for instance where a non-disclosure agreement applies, and can provide it in person, in redacted form or later in the process. Managers who skip a detailed question are asked to explain briefly why. An unexplained blank or a bare N/A usually produces a follow-up question.