Completion Of The Questionnaire Is A Legal Requirement Under: Fill & Download for Free

Today was my German Student Visa Interview, i.e. 01/07/2019.My appointment was at 10:45 A.M. at German Consulate, Mumbai. I had left home early at around 7:15 A.M., but alas, heavy rains made me a bit late, as I had planned that I would be reaching the consulate by 10:00 A.M. in the worst case, but that didn’t happen, I reached just 2–3 minutes prior to my appointment and was about to miss the timing. So, please during heavy rains start extra half an hour early if you stay far away, like me, as I stay in Navi Mumbai.After the security checks, I handed over the asked documents at the counter, They were:1.Visa Interview Receipt2.Passport3.Demand Draft4.2 duly filled demand draft forms5.1 PhotoAfter submiting these required documents, I was given a token along with the guidelines about how to arrange the documents. I was also returned the documents except for photo, if I remember. I was also told to write my name, mobile number and passport number behind the demand draft. Please do not stick your photos on the application form. They will tell you when to do it.Then, I had to arrange the entire documents according to their guidelines at the waiting area. I was a bit nervous though, as I was alone and a single mistake in missing the document would affect my visa approval. So, anyways I was told to arrange the documents in order.First was Demand Draft, then 2 duly filled demand draft forms, then additional legal and contact information form.Then I had to make 2 copies of all the documents which I had carried with me. ‘I am just mentioning the documents, which they had asked for (they are not in order).They had asked for Application Form, Declaration on True and Correct Information Form, Admission Letter, Confirmation of payment of fees, Admission Contract, Embassy Letters, Health Insurance, Class 10 Marksheet, Class 12 Marksheet, Diploma Certificate (If applicable), Bachelor’s degree certificates (if applicable), Blocked Account information (if applicable), Bank Statements, Identity copies of sponsorers with their signs (Passport and PAN Card only), affidavit of sponsorship, cover letter (signed), motivation letter, IELTS/TOEFL certificate if applicable, German proficiency certificate and your passport copies. Make sure you sign all the copies of your passport.After arranging the above documents in the order as mentioned by them, you need to wait for sometime until you are called. Then you need to go to a counter for submitting your documents. The Visa Officer will first ask you to submit the passport with token, application form and photos. Then the Visa Officer will ask you to submit all the documents which are in 2 sets. Then that person will go through each and every document. Meanwhile, they will ask some general questions as well.The following questions were asked to me:What will you be studying in Germany? Which university?Where do you stay?What is your highest education qualification, how much did you score?Where is your university?Do you have a blocked account?What is the medium of instruction for your course?Tell me your motivation in one line.What is the duration of your stay in Germany? (If you are going for foundation course (Studeinkolleg), which I would be doing, you should also include the period you would spend in Germany after your foundation course. Like for me, one year is studeinkolleg, then 3 years of bachelor's, so it's a total of 4 years. This is vital as it will decide whether you are going there for a long period of time or not and this will decide you will come under which category, for long term visa it is category-D.Where would you be studying after Studeinkolleg?Do you know any German?After these questions, the visa officer was done with seeing the documents. The visa officer had not asked for my parent's bank statements, Income Tax Returns, Affidavit of sponsorship as I had already paid the fees well in advance, so my process was quite fastracked.They just asked 3 original certificates, viz. Class 10 mark sheet, Class 12 mark sheet and IELTS certificate in my case.After all these formalities, I was handed over the documents which were not needed by the visa officer. I was then told to fill a questionnaire and write a motivation letter on the back of the questionnaire. The motivation letter was supposed to include Why Germany as your study destination?, About your course and your future plans after your course. The questionnaire was quite simple and had just general questions. Only, 1 thing I would recommend you is that learn some names of few scientists of your field of study as that was asked on the questionnaire.After this, I was handed over the receipt of payment of Visa Fees, the passport was stamped with the date of visa interview and the type of visa category which in my case is a category-D and was told to get my passport stamped at the nearest VFS Centre, once I get my visa approved. It was also told that I should not contact the consulate for upto 90 days regarding my visa decision and that they will take up to 90 days for getting my visa approved. However, don’t get scared that they will take so many days, they give it usually within 3 weeks as well, as it was the case with some people.After that, I was told that all my documents have been accepted.Looking forward to getting a positive response and get my visa approved. But, I have a gut feeling that it would be accepted as I have already paid the fees and have not left any documentation incomplete.Tip: Don't staple any document, just use office pins/U-pins for distinguishing one document from one another. However while submitting the documents, remove all the pins. Carry 2 photocopies of all the documents and take extra copies of demand draft forms, declaration of true and complete information form, additional contact, and legal representation form as if there are any errors you can get them rectified over there. Do check the visa fees properly as I saw many people had committed this mistake and bought the DD of incorrect amounts, leading them to go back. Also bring as many documents as possible, as you never know what they may ask. They had not asked for air tickets, though I had booked it. So, it's your choice whether you want to book the air tickets before the visa interview or not.If you have any queries, do ask me.P.S. I am going to Germany for a bachelor’s, hence the one-year foundation course (Studeinkolleg).All the best for your Visa Interview.Edit: My visa got accepted on 04/07/2019, which is unbelievable.Do watch my YouTube videos related to German student visa as I have given the enitre process of obtaining the visa in detail.Please subscribe to my channel.🙏

In the United States there are more than 20,000 total firearms laws. But here’s a look at Gun Regulations vs. Car regulations with a bit of humor added:I keep hearing people say they want to regulate guns the way we regulate cars. They don't really mean that, of course. What they mean is they want to make it acceptable to find more ways to intrude on the right to keep and bear arms.I propose instead, we regulate cars the way we regulate guns. Let's start:To buy or operate a standard car, one will have to be 18 years old. Under that age, adult supervision will be mandatory. This means the adult must be in the vehicle with the underage driver.To buy a sports car, you will have to be 21. A "Sports car" will be defined as any combination of any two of the following: 2 doors instead of 4, spoked rims not requiring hubcaps, aerodynamic effects such as spoilers or air dams, a wheelbase under 100 inches, a manual transmission, a curb weight under 3000 lbs, fiberglass or other non-metal construction, or painted logos.For every purchase, you will have to fill out a questionnaire confirming you're a US citizen, do not use drugs or abuse alcohol, have never had a conviction for alcohol related incidents or reckless driving. Lying on this form will be punishable by 10 years in prison and/or a $10,000 fine.New cars will only be purchased from Federal Automobile Licensees who must provide fingerprints, proof of character, secure storage for all vehicles, and who must call the Federal Bureau of Motor Vehicles to verify your information before purchase. They may approve or decline or delay the sale. If they decline, you may appeal the decision in writing to a review board. If they delay, it becomes an approval automatically after 10 days. However, the dealer may decline to complete such a sale in case of later problems.Additionally, the purchase of more than two cars in a given year will require signing an understanding that buying cars in order to resell them without a license is a crime. There is an 11% federal excise tax on all new vehicles, plus any state or local tax.Federal Automobile Licensees must agree to submit to 24/7/365, unannounced, unscheduled searches of their entire homes, businesses and any relates properties and personal effects to be named later.Then you will be eligible to take your drivers' license test to determine your eligibility to operate on the street. Rules will vary by state, with some states requiring proof of need to own a vehicle for business purposes, and up to 40 hours of professional education. Also, not all states will accept all licenses. You will need to keep track of this information. Additionally, speed limits will not be posted. It is your responsibility to research the driving laws in each area you wish to travel through. Some communities may not allow out of state vehicles, sports cars, or even any vehicles at all. Violation of these laws will result in confiscation and destruction of your vehicle by crushing.To have a turbocharger, supercharger (External Engine Compression Devices) or a muffler will require an application to the Federal Bureau of Motor Vehicles. A $2000 tax stamp will be required for these High Performance Vehicles. Your request must also be signed by the local chief law enforcement officer, and you must provide fingerprints. If approved in 10-16 weeks, you will be responsible for keeping your High Performance Vehicle in secure storage, and request permission in writing to take it out of state. You will need to carry this documentation with you. There are 13 states that do not allow possession of High Performance Vehicles. Be sure you are aware of those laws before planning your trips. (But really, what do you need such a vehicle for anyway? Who really needs to drive that fast? You must willingly accept and adhere to the socially accepted idea that you are inherently evil for merely possessing such a fast, high powered automobile.)Additionally, superchargers and turbochargers must be manufactured before June 1, 1986. They may be sold and refitted by a FAL who also has a Special Occupational Tax license authorizing him to work on these. New superchargers, however, are a violation of federal law, except for use by the police or military, or specific government contractors. Expect to pay $15-$30,000 each for these items. Mufflers will only cost from $250-$1000, plus the $2000 stamp. However, once the muffler is damaged, it must be disposed of by cutting it into three pieces. Failure to do this may result in your family going through the next decade only knowing you in a prison jumpsuit and all your bank accounts seized and never replenished.Imported sports cars will be prohibited. You may purchase other items from foreign manufacturers, but your automobile is in a special class of prohibition due to its inherently evil and sinister nature. The frames may be imported, cut into three pieces, and reassembled with US made engines and suspensions, as long as 60% of the parts are American. Shortly, though, the Transmission Loophole will be closed. The purpose of allowing imports is for spare parts, not to build more destructive "race vehicles.” Transmissions will have to be US made.Repairs may only be conducted by a licensed FAL, who will send a truck to retrieve your vehicle. It must be a flatbed type truck, winch/dolly trucks are not allowed, under 10/$10,000 penalty. You may work on your own vehicle, but any repair that exceeds emission or performance standards will be subject to federal criminal charges. And violation of this reasonable regulation could result in not only your imprisonment and the confiscation of your assets but imprisonment of any employee or family member who was insane enough to repair your “race car” for you.Be aware that an existing HPV may have multiple HP Features. A new HPV will require a license for each feature you wish to add to it—one each for muffler or external engine compression device. And you must request and receive, in writing, permission from the federal, state and local governing authorities prior to making such modifications.Converting a standard car to a sports car will require payment of a $2000 tax, even if no HP features are added. However, if an FAL/SOT does the conversion on a new frame before the vehicle leaves their premises, it will only be a $50 tax. You will need to carry this documentation in the glove box at all times, the mere failure of which alone can result in an arrest and possible conviction.There is discussion of closing the Car Dealer Loophole, through which private individuals sell cars to friends without going through an FAL. It is important we have these background checks. Surveys show criminals prefer to buy unlicensed to get around their legal liabilities so they can commit crimes in stolen vehicles, which evidence has proven for many years to be true.Some vehicle law convictions will result in loss of your driving privileges forever. This includes reckless operation, drunk driving, an incorrect bumper height or attachment, or the wrong type of exhaust. Collisions may also result in permanent loss of driving, if injury occurs and negligence is proven. In addition, any felony conviction of any kind--even tax evasion--will mean permanent loss of your driving privileges. In these cases, it will even be illegal to ride or sit in a friend's car.There is also discussion of prohibiting brightly colored vehicles. Vehicles are transportation, not toys, and should not be marketed in a way that suggests they are intended for casual use. It is important that everyone be aware of the dangerous nature of cars.In the future, we may have to consider large displacement engines (anything over 2.5 liters) and transmissions with more than three speeds as being High Performance Items to be added to the federal registry. There will be a window during which you can register your items for $2000 each, provided you meet the background check. Otherwise, you will have to immediately surrender them to an FAL/SOT to dispose of on your behalf. Operating an unlicensed HPV after this date will result in confiscation and destruction of the vehicle, and the 10/$10,000 punishment.These laws and regulations are due to drunk drivers, reckless drivers and other criminals. The automobile community should be glad it is allowed to exist at all, given all the deaths and environmental damage caused by these vehicles.The president said today that he strongly supports your right to own and drive basic, standard vehicles for farm use and carpooling. But he and many other people have made it clear that eventually – maybe this month – we need to cease all manufacturing of such high powered automobiles for the civilian market.Eventually, we need to move away from the notion that owning and operating a vehicle is a right and entitlement, and limit it to people with a proven, bona fide professional need. There are plenty of trains and buses for normal people. This is how most civilized nations are moving and is not a violation of your right to travel.Taken from : WE NEED TO REGULATE CARS THE WAY WE REGULATE GUNS(1) No federal licensing or registration of car owners.(2) Any person may use a car on his own private property without any license or registration. See, e.g., California Vehicle Code §§ 360, 12500 (driver’s license required for driving on “highways,” defined as places that are “publicly maintained and open to the use of the public for purposes of vehicular travel”); California Vehicle Code § 4000 (same as to registration).(3) Any adult — and in most states, 16- and 17-year-olds, as well — may get a license to use a car in public places by passing a fairly simple test that virtually everyone can pass.(4) You can lose your license for proved misuse of the car, but not for most other misconduct; and even if you lose your driver’s license, you can usually regain it some time later.(5) Your license from one state is good throughout the country.Taken from : Why not regulate guns like cars?Here’s what gun ownership would look like if guns actually were regulated like cars.Car dealers don’t need to be licensed by the federal government. Gun dealers do.Car dealers don’t need to keep meticulous records of all transactions under penalty of law. Gun dealers do.Cars don’t require registration to own or licensing to operate. Neither do guns.Cars can legally be sold across state lines. Selling a gun across state lines is a felony.Driver’s licenses are valid in all states. Concealed carry licenses aren’t.I don’t need to tell the ATF when I take my short wheel-base car to another state. I do need to tell them when I take my SBR hunting rifle.Cars aren’t banned just because they look scary. “Assault weapons” are.Taken from Debunking the "Guns should be Treated like Cars" Analogy - The Truth About Guns

Short version: We turn over every stone, and keep turning before, during, and after an investment is made.Long version: I perform hedge fund due-diligence (DD) for family office and institutional investors so this topic is quite near and dear to me. I’m proud to have steered our clients away from several funds that turned out to either be fraudulent or blew up for operational reasons. We’re dealing with allocation sizes in the tens of millions so the stakes are obviously very high. I’ll try to be as detailed as possible but this will really only scratch the surface at best.There are several objectives to hedge fund DD (and it’s not all about making sure the manager isn't a Madoff.) It helps to recognize from the outset that each hedge fund is first and foremost a business, and for businesses to be successful they need to have a differentiated product, a repeatable process for creating that product, and as a potential client you need to evaluate your own need for the product. In other words, what is the manager's differentiating 'edge' (see Nate Anderson's answer to As a fund manager, what’s the best response to, "What is your edge?" when asked by a potential investor? I talk about the differentiated strategy approach and team experience. I’m not sure there’s a genuine structural edge in the investment business.), what is the process for exploiting that edge, and how does it fit into your portfolio?To answer these questions investors must gain a deeper understanding of all of the following: (a) the strategy, (b) the investment process, (c) the people involved in the fund, (d) the ‘business’ operations of the fund, and (e) the performance track-record.Initial ReviewTypically, the DD process starts with an initial document review to glean the basics and see if its worth taking the meeting. I generally start with the tearsheet, presentation, and recent investor letters. Every investor has their own limiting criteria, but depending on the investor some will pass right away due to factors such as:Size of the fund. Some investors want the sense of ‘safety’ from a large fund, while others prefer smaller funds due to their higher return potential. (My diligence is generally focused on smaller funds, which may have higher operational risk, so the research burden tends to be higher.)Undifferentiated strategy or an unfavorable strategy for the market environment.Lack of a track record. Many institutions and investors require 3 years of track-record or a ‘portable’ track record from a manager's previous firm in order to get comfortable with their historical ability to perform. Again, I have some investors who are comfortable being 'day-1' money which raises the due-diligence threshold.Poor relative or absolute historical performance.High volatility or large drawdowns.Poor quality of investor communication. The only thing that differentiates a 'black-box' from a transparent fund is communication. If the communication from managers is sparse or uninformative it is tough to get comfortable with a strategy. We generally like to see monthly performance updates with quarterly commentary. Anything more frequent may mean the manager is spending too much time writing, and anything less means we are in the dark for too long.Lack of credible third-party service providers (auditor, independent fund administrator, prime broker, legal counsel.) Third-party service providers are the checks and balances on a manager's operations. Investors do not get compensated for taking on unnecessary operational risks, so if we don't see auditors, administrators, and prime brokers in place we will pass immediately.MeetingIf the manager passes our initial document review we'll take a meeting. The first meeting(s) are usually the standard pitch, a walk-through of the presentation, and a high-level Q&A. Though we'll have an idea going in on what we want answered and what we'd like to discuss, we let the manager start with their pitch and always end up free-forming after a while. The idea is to get a sense of the manager, personality, and to probe on different areas of interest or concern and get a sense of whether it holds up.If the strategy, performance, fund structure, and people all pass the initial smell test and merit further interest, due-diligence begins in earnest. An initial document list is requested which generally includes:Marketing materials:Investor letters since inception. These give us a sense of the quality of communication, investment ideas, research, and insight into the manager’s personality and approach.Relevant PR such as interviews, press releases, and published articles.Due-diligence questionnaire aka the ‘DDQ’. This is a key document that asks 100+ detailed questions about the fund. The AIMA (Alternative Investment Management Association) version is the most common DDQ. We review the DDQ provided by the manager and compare it with the AIMA DDQ to see if the manager deleted any questions from the list. Usually, when a question is missing from a DDQ it's because it was irrelevant to the strategy, but sometimes a deleted question can be HIGHLY relevant and show what questions the manager doesn’t want to answer. (Here's a random completed DDQ off Google in case you’d like to get a sense of what that document looks like: Page on opcvm360.com)Research samples. Again these give us a sense of the depth and focus of the investment process.Legal:Private Placement Memorandum. This is the legal doc outlining key terms of the fund. This is generally where all the nuances on fees and fund structure are found. See How do you describe, calculate, and interpret management and incentive fees and net-of-fees returns to hedge funds? for more detail on nonsense to be aware of surrounding hedge fund fees.Subscription documents. We review to make sure everything is consistent with the PPM.Partnership agreements. These detail terms of the business structure and can also detail nuances of the fund structure.State certificate of organization/LP certificate/state registration doc, IRS W-9 tax ID form. These are mostly just confirmatory documents.Other:Audits since inception. The independent auditor’s report is of critical importance, as it will reconcile assets, portfolio balances, performance, and often provide insights on portfolio construction, liquidity of underlying assets, and back-office protocols.Independent prime brokerage report as of last completed audit. This allows us to see even more detail on the portfolio from the time of last audit and allows us to reconcile the audit with the actual portfolio. If anything doesn’t line up with the audit it means either we or the auditor are missing something.Reference list. They will all obviously be glowing references, but the choice of references can be very important. Who they leave out of the reference list is often more instructive than who is included. That being said, sometimes good information can be found through the references.Service provider contact information. We verify the relationship with each service provider, and perform due-diligence on the service providers to get an understanding of the terms and length of the relationship with the fund.Any external or internal risk reports. These give us a sense of how they measure risk, what risks they control for, and how they fall within those parameters.Regulatory registration documents such as form ADV for advisers. This is more confirmatory information but can also show critical pieces of information such as assets under management as of a particular date, key principals, number and type of clients, and compliance with the law.Once the document review is completed, you’ll likely have a better understanding (and many new questions) about key issues surrounding the 3 P’s: people, process & performance. The next step is to dig on areas of interest or concern to learn more on each of these three areas.PeopleOne of my favorite stories on manager due-diligence came from a well-known investor who passed on a hedge fund because of a raincoat:The investor wanted to get to know the manager better, so they agreed to go on a hike. Halfway up the mountain it began to downpour. Unfortunately, the manager hadn’t checked the forecast and spent the latter part of the hike completely drenched. The (dry) investor realized at that point that the manager was a little too focused on the adventure ahead of him and not at all focused on managing the predictable risks along the way. The investor passed due to concerns over risk management.We haven’t passed on any managers over rain gear, but I think the point is relevant. In poker, you must observe everything about a player; betting patterns, style of play, tolerance for risk, and personality. You piece together an understanding of the person from the data in order to get a sense of their tendencies. The same applies to due-diligence on people. Fortunately we have a lot more data to work with than at a poker table:Background checks. We use a service that looks for criminal, regulatory, and civil infractions, including Anti-Money-Laundering checks on all principals and key employees of a prospective firm.Regulatory checks. The Financial Industry Regulatory Authority (FINRA) has a very comprehensive database of brokers and investment adviser firms that shows whether individuals or firms have had any regulatory infractions, their registration status, whether they’ve had any arbitration awards issued against them, and the full employment record of registered individuals (among other things). It also ties into the SEC database which is often relevant for larger firms. All of this is obviously extremely valuable background information. One little trick we use is to match up the employment record of the principal with the bio in their marketing materials. Often they will leave firms out of their bio if they had a bad experience there, though they'll include it on their regulatory filings. It may bring up points that require further digging: BrokerCheck: Research Brokers & Investment AdvisersBack-channel reference checks. This is probably one of the hardest things to do effectively, particularly for industry outsiders, but this can be a source of absolutely critical information. This is the scuttlebutt; the “I’ll talk to my guy who worked in this manager’s Deutsche Bank division when he was a portfolio manager...” This approach is often how you get the ‘real’ story behind a manager.Regular ol’ reference checks. You have to cut through the glowing praise and ask the right questions to really get a sense of the truth, but these can be helpful.Direct interviews with the manager. This doesn’t have to be a cross examination but during the meetings there should be a component of confirmatory questions along with getting a sense of the manager’s personality, background, and approach.Google. (Never underestimate!) I was asked by a family office to diligence a manager and I googled the manager before anything. Past investors had posted on a forum that the manager lost 90%+ of their money by making risky bets then doubling down when the original bets didn’t work out.Skin in the GameAlso worth noting is that it's incredibly important to know that the manager has invested in their own fund, and that they are risking their assets alongside yours. Most investors want to know what percentage of the manager's liquid net worth is in the fund, and will often request documents to prove it.Operational and Investment ProcessNow that you understand more about the people you’re working with, you want to understand the structure and processes that constrain them.A hedge fund, like any other business, creates a product (a portfolio). In order to generate consistent portfolio performance you need to understand the sausage factory, including both the investment process AND the operational processes in place.I know what you’re thinking—operations are boring. The sexy stuff is how people come up with their brilliant investment ideas. Unfortunately, the operations and business side of the fund are not trivial matters; research has shown that over half of all hedge fund blow-ups occur due to operational issues that have nothing to do with the investment process. As unappealing as it is to try to figure out the nuances of how Net Asset Value is calculated and reconciled with the fund administrator, it’s even less appealing to lose a billion dollars because you didn’t take the time. (Yes, turning over every stone means turning over the ugly ones too.)I’ve seen institutional investors pass on funds for reasons which may not be immediately obvious problems to a new hedge fund investor. Below are some examples. If you can think through the issues or potential issues with each real-life scenario below then you are off to a good start:A small fund required a single signatory on cash transfers.A fund had legal entities for their marketing, deal sourcing, and investment divisions of the firm.A large, well-known fund has used a big-4 firm as their auditor since inception, and worked with several offices of the firm over the course of their relationship.The same fund in #3 managed their fund administration internally.A fund was down 3% one month.A fund had rehypothecation agreements in place with their Prime Broker, a major, well-respected Wall St. bank.I imagine some of the above might not even sound like English. So what does it mean and why were these all problems for the prospective investors?Single signatory. Like any other business, embezzlement can be a problem for hedge funds. Requiring a single signatory to move cash, particularly for a small fund, means that a founder/key employee can potentially loot the place without limits. It’s not unheard of for a business owner to get served divorce papers then decide it's time for an early retirement in a tropical, non-extradition friendly country. On a less major scale, an employee may embezzle smaller amounts systematically over time. Hedge funds generally have much higher asset liquidity than traditional businesses, and therefore cash stewardship is of utmost importance. For these reasons, institutions usually require double signatories on cash transfers, often with one signatory being a credible, independent fund administrator.Multiple legal entities. Separate legal entities are put in place to limit liability (and potentially transparency) between entities. Whenever a manager puts legal shields in place between different operational aspects of a fund the investor should have a very clear understanding of why that is the case. In this case the reasons didn’t pass the smell test, and were likely in place to obscure important information for investors.Using several offices of the same accountant. Accountants understand the concept of multiple legal entities all too well. For example, each office of PWC may have its own separate legal entity which protects the greater organization and other offices from shared liability. In other words, working with 3 different offices of the same firm can be like working with 3 completely different firms. Another fact about accountants: If they find a problem with a fund (or a company) they will often resign rather than report their suspicions. In this particular example, 3 offices of the same accounting firm resigned over the course of the life of the fund. Unfortunately, most investors just thought: "Well, the manager has used a credible firm since inception, therefore it’s all kosher." Wrong.In-sourced administration. Approximately 90% of all hedge fund frauds would be eliminated through use of a credible outside fund administrator to manage valuation, NAV reporting, subscriptions/redemptions, and the back-office functions of a hedge fund. Madoff (again) in-sourced his administration. He couldn’t have reasonably pulled off his fraud had he used a credible outside administrator.Fund down 3% in a month. This by itself isn’t a problem. Some funds have high volatility and +/- 5% or more in a month isn’t unusual. The problem was that this particular fund’s investment strategy was expected to generate a slow, consistent half percent a month. A drawdown in one month of 3% in the context of that strategy was a red flag. The next month the fund was down 9% and subsequently lost another 20% before shutting down.Rehypothe-what?? Rehypothecation is when the fund lends their securities to their prime broker. The broker can then use the securities as collateral to lend against, and will generally pay the fund a small fee in return, which helps lower the fund’s brokerage expenses. Here’s bottom line: When Lehman Brothers went bankrupt, this small distinction determined who 'owned' the assets. It was the difference between blow-up or solvency for many funds. (Literally billions were lost or saved over this nuanced operational detail.)In addition to operational processes, the investor must understand the investment processes in order to get a sense of how the fund’s portfolio is constructed. How does the manager source ideas, and what does their own research consist of? What kind of risks does the fund take? Risks such as currency, security, sector, market, interest rate, volatility, and countless other risks can be a part of the portfolio construction process. How does the manager make sure they are adequately compensated for those risks? How do these risks fit into the investor’s broader portfolio? Professional portfolio managers must account for all of these factors with the funds they invest.Performance.On every disclaimer on every document you will read from a hedge fund it will say: "Past performance is not indicative of future results." I'm generally not a fan of legalese but this bit should be taken as gospel. Historical returns are in the past, and without understanding them in the context of the strategy, the risks taken, and the changing nature of the strategy in the market then those returns are meaningless. Statistics lie. At the very least they can mislead: Did you know that the Vatican City has 5.9 Popes per square mile? True fact.Lets go through another quick example. If a manager tells you “we returned 100% last year.” Are you:(a) Excited(b) Interested(c) Skeptical/unsure(d) Overwhelmed by feelings of inferiority over your own lousy returnsIf the answer is anything other than lots of ‘c’ with a little bit of ‘b’ then you need to learn more about what performance means. (If your answer is ‘d’ I suggest yoga.)Performance needs to be understood in context. What risks did you take to make 100%? What is the volatility an investor can expect on those kinds of returns? (No matter how great your returns are, you only need to lose 100% once to wipe it all out.) Statistics like Sharpe ratios, maximum drawdown, correlation, and volatility can only really be helpful in the context of the market and the strategy that contributed to that performance.I once met with a manager who returned 142% in 2009 and 55% in 2010. Those were eye-popping returns, and they had all the right service providers and statistical ratios to ‘prove’ how credible and great they were.The manager told me that their whole strategy was to analyze momentum price signals, because “when you focus on one thing all day you get pretty good at it.” They were a complete black box as far as their model and their investment process, but the manager shared one aspect of the model: “When the market goes up we are able to capture those returns, but as soon as the market starts to drop, the model shuts down in order to mitigate any losses.” Classic baloney. (Explanation: Unless you know whether the market will continue to go down or up you can't determine when to turn the model on or off. He was basically implying that they could perfectly predict the direction of future price action in the market.)I passed on the fund, and it literally blew up the next month. (To be fair, I didn’t realize it would blow up so soon, though I did know that it would inevitably blow up with those returns coupled with no credible explanation of how they produced them or why they would persist.) The moral is that it's hard to find an edge and generate consistent returns, and historical performance (whether good or bad) has to be understood in full context.OverallThis overview really just scratches the surface but hopefully the framework and actionable tips are helpful. Many institutions view their due-diligence process as proprietary, but personally I’d rather see all investors have a deeper understanding of the process. It’s bad for the industry when charlatans run around with impunity, and quality diligence helps lift the entire profession. Most hedge fund managers are good people (honestly), but even among good people there can be a lot of average performers and undifferentiated strategies. A good due-diligence process can be both informative and collaborative-- in addition to learning about the managers our DD process often leads to operational improvements among funds we work with.Take your time, and don’t be afraid to ask even seemingly stupid or awkward questions. The best questions are often a little bit awkward. Always keep in mind that the next stone you turn over could be the difference between gaining or losing everything. If a manager seems reticent to provide information or answer your questions its generally a sign of what the relationship will look like going forward. Investments in hedge funds are ultimately partnerships and the good managers will understand and appreciate your need to learn before investing. Good luck!