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Due Diligence FAQs

Should the fund have Soft Dollar Agreements?

Soft dollar arrangements, for services such as research, can provide a benefit to an investor, but at the same time they create conflicts of interest that compromise best execution policies and the fiduciary responsibility a manager has to its investors.

In order to ensure that soft dollar arrangements comply with jurisidiction-specific regulations and are conducted in a consistent, fair and equitable manner, the manager should have formal policies and procedures in place for when and how soft dollar arrangements may be leveraged.

From 2018, these will be banned in many cases in Europe, but funds managed under UCITS and AIFMD will remain capable of having soft dollar arrangements. The key for investors is to understand them and for managers to explain them.

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