What is operational due diligence (ODD)?

Operational due diligence (ODD) is the process by which an institutional allocator (pension fund, sovereign wealth fund, fund of funds, endowment, family office, consultant) reviews the operational, technological, control, and governance environment of a fund manager before allocating capital. ODD is distinct from investment due diligence (which assesses the strategy, track record, and team) and focuses on whether the manager has the operational infrastructure to deliver the strategy reliably and to safeguard investor capital. A typical ODD covers the manager's policies and procedures, internal controls, technology and cyber posture, third-party service providers, valuation governance, business continuity, and regulatory standing.

How long does an ODD take?

An institutional ODD typically takes between four and twelve weeks from initial document request to final memo, depending on the allocator's process and the manager's responsiveness. The on-site visit is usually one or two days. Document review and follow-up questions account for most of the elapsed time. For a manager that is well-prepared, the ODD process is materially compressed; for a manager that is reacting to each question as it arrives, the ODD can extend significantly and may not result in an allocation.

What are the most common ODD findings that prevent allocation?

The most common findings that result in either a declined allocation or a conditional allocation include: an inadequate or generic policy set that does not reflect actual practice; weak segregation of duties (one person responsible for trade execution, valuation, and reconciliation); valuation policy that is not consistently applied; insufficient cyber controls (no MFA, no incident response plan, weak vendor management); over-dependence on a small number of service providers without documented oversight; inadequate business continuity testing; and unresolved regulatory or audit findings.

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Operational due diligence (ODD) for UAE fund managers: a readiness framework

27 April 2026 · 12 min read · By Fundtec

An institutional allocator running operational due diligence on an emerging fund manager has one effective question: can this firm deliver its stated strategy reliably and protect our capital from operational failure? Everything in the ODD process is in service of answering that question, and the answer determines whether the manager receives the allocation or is declined for reasons that have nothing to do with the investment thesis.

This article sets out a readiness framework for UAE-based fund managers preparing for ODD. It is written for emerging and mid-sized managers (sub-USD 750 million AUM) operating in ADGM, DIFC, or the wider UAE, who are typically engaging with institutional allocators for the first time. The position is practical: ODD is winnable, but it is winnable through preparation rather than through performance under pressure.

What the ODD actually covers

The institutional ODD spans seven domains. The relative weight given to each varies by allocator and by strategy, but every credible ODD will touch all seven.

Governance and ownership. Who owns the manco, who controls it, what the governance structure is, and whether key-person risk is appropriately mitigated.
Policies and procedures. The full policy set, including valuation policy, best execution, allocation, side letters, MNPI, personal trading, gifts and entertainment, expense allocation, and conflicts of interest.
Internal controls and segregation of duties. How the manager prevents and detects errors and fraud through process design, independent review, and reconciliation.
Service provider oversight. The manager's relationships with administrator, custodian, prime broker, auditor, legal counsel, and technology vendors. Selection rationale, ongoing monitoring, and contingency planning.
Technology and cyber. Systems architecture, data flows, access controls, MFA, encryption, backup and recovery, incident response, and third-party security ratings.
Valuation and NAV process. How the NAV is computed, by whom, with what oversight, with what fair-value methodology, and with what independent challenge.
Regulatory standing and business continuity. The manager's regulatory permissions, recent regulator interactions, financial soundness (including capital adequacy where applicable), and tested business continuity plan.

The framework: four phases of readiness

ODD readiness is not a binary state; it builds over time. A practical framework runs through four phases.

Phase 1: Foundation (pre-launch through first 90 days)

Before the first allocator conversation, the manager needs the foundation in place. This is not an optional pre-step; an allocator running ODD on a manager that does not have these in place will not progress the work.

Regulatory authorisation in good standing (FSRA, DFSA, or other applicable regulator).
A written policy set covering all seven ODD domains. Not generic templates; policies that reflect actual operational practice.
Appointed administrator, auditor, and (where applicable) custodian and prime broker, with executed service agreements.
Documented governance structure, including investment committee, valuation committee, and any other relevant committees, with charters and minute-taking discipline.
Operating insurance: professional indemnity, directors and officers, and cyber, at appropriate cover levels.
A working technology stack with role-based access controls, MFA, and basic cyber hygiene.

Phase 2: Hardening (months 4-12)

Once the foundation is in place, the next phase is hardening: tightening the operational layer to the point where it would withstand a serious ODD. The work is incremental and benefits from external review.

Independent NAV oversight: a senior reviewer (in-house CFO, fractional CFO, or specialist consultant) validating the administrator's NAV computation each cycle, with documented exception resolution.
Reconciliations between OMS, custodian, administrator, and broker, run on a documented cadence with exception logs.
Tested business continuity plan: actually executed once, with the test documented and findings remediated.
Tested cyber incident response: tabletop exercise with the technology team and external counsel, documented.
Periodic policy review and update: each policy reviewed annually, updated if practice has evolved, signed off by the relevant committee.
Vendor due diligence on the major service providers: SOC 2 reports collected and reviewed, financial soundness reviewed, contingency arrangements identified.

Phase 3: ODD-ready (12-24 months in)

By this stage, the manager can credibly host an ODD. The hosting itself becomes a project: pre-ODD memo prepared, document repository organised, on-site visit scripted, anticipated questions rehearsed.

An ODD pack: the standard institutional document set, organised for delivery within hours of the request rather than scrambled together over days.
An ODD response team: typically the COO or head of operations, the CFO or fractional CFO, and a senior partner. Each team member knows their part and has rehearsed the on-site responses.
Mock ODD: an external review (legal, consulting, or a peer firm with ODD experience) running through the document set and asking the questions an institutional allocator would ask. Findings remediated before the real ODD.
Track record of completed ODDs: even if no allocation has yet resulted, the manager has been through the process and has a documented record of what was asked, what was answered, and what was identified for improvement.

Phase 4: Institutional-grade (ongoing)

The mature operational posture is one where ODD is part of the manager's ongoing operating rhythm rather than a one-off scramble. Each new ODD is largely a refresh of an existing pack; each finding becomes an input to the next quarterly operational review.

Common findings that derail emerging managers

Five patterns appear repeatedly in declined or conditional ODDs.

1. Generic policy set. The manager has copied a policy template from a vendor or peer, has not adapted it to actual practice, and cannot answer questions about how the policy is implemented day-to-day. The allocator concludes the policy is decorative rather than operational, and the rest of the ODD is conducted with elevated scepticism.

2. Weak segregation of duties. One person executes trades, books trades, runs reconciliations, and approves valuation overrides. This is common in small managers and is the single most cited reason for declined institutional allocations. The fix is structural: separation of duties at the design stage, validated by external review.

3. Inconsistent valuation practice. The valuation policy says one thing; the actual valuation process does something subtly different. The administrator and the manager disagree on a position. There is no valuation committee, or there is a committee that does not meet, or the minutes do not reflect the discussion. The allocator concludes valuation is uncontrolled and walks.

4. Inadequate cyber. No MFA on critical systems. Phishing-susceptible employees with no documented training. No incident response plan, or a plan that has never been tested. Vendor security reports either missing or not reviewed. For institutional allocators with their own cyber requirements, this is increasingly a stop-the-allocation finding.

5. Service provider over-dependence. The manager is wholly dependent on a single administrator with no documented contingency arrangement. The auditor relationship is informal. The OMS vendor has no SOC 2 report. The allocator looks at the operational dependency map and concludes the manager has not actually engineered redundancy into the operating model.

Where Fundtec adds value

Fundtec's COO consulting practice is structured around the four phases of ODD readiness. Engagements typically begin with a gap assessment against the seven ODD domains, followed by a remediation plan, policy build, mock ODD, and ongoing operational oversight. The work is partner-led; the deliverables are the actual policies, controls, and operating documents the manager needs, not advice on what to commission someone else to build.

For managers preparing for institutional allocation for the first time, the operational discipline imposed by genuine ODD readiness becomes a long-term asset. The manager that passes ODD comfortably is the manager that can scale to the next AUM tier without re-engineering the operating model.