John Mauldin is among other things a serial writer and an acute investment professional. I enjoy very much reading his Thoughts from the Frontline e-letter or the various articles he features in his outside the box letter.
He has posted a draft chapter of his new upcoming book about Absolute returns on his website (http://www.accreditedinvestor.ws/downloads/Due_Diligence.pdf). The name of the chapter is "Evaluating Hedge Funds" and describes his approach to due diligence.
Also it is quite challenging to describe a due diligence process in only 22 pages, I noticed a few ideas which are worth considering in your analysis of an hedge fund:
• Some hedge fund managers are good and some are just lucky. You do not want to invest in the lucky one, as luck always run out, typically just after you invest.
• The business side of the fund is as important as the investment side.
• The most important thing to understand about a fund is "Why" it makes money. If you cannot understand the "Why" of a fund, you should not be investing.
• A brilliant manager who can't follow through on the paperwork is a disaster in the making.
• Second level references are far more informative that the given references
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