The Ultimate Guide to LP due diligence questionnaire (DDQ) for Emerging Fund Managers

Being a new fund manager is like being the new kid at school. Everyone’s watching, but no one knows you. You could be a genius, or you could be bluffing. No one’s really sure, so they default to scepticism. And it’s your job to prove them wrong.

For emerging managers, the LP due diligence process isn’t just about showing your numbers. It’s about showing that you’re prepared, that you’re thoughtful, and that you’ve anticipated the questions LPs are too afraid to ask. It’s about turning their doubt into confidence.

In a world where LPs have their pick of established managers with decades of track records, your edge isn’t just your strategy — it’s your transparency, your openness, your willingness to answer questions that others avoid.

Let’s walk through the major components of the LP DDQ, and how you, as an emerging manager, can use it to your advantage.

1. Firm Overview

LPs aren’t just investing in a strategy. They’re investing in people. The first section of the DDQ is your chance to tell the story of your firm, your background, and what sets you apart.

You’re probably not the first fund manager they’ve spoken to. But you could be the one who stands out. So, how do you do that?

It starts with clarity. Be straightforward about who you are and what drives you. LPs want to know what motivated you to start this fund and why you believe now is the right time. If you’re a first-time manager, that’s okay. Your previous experience, even if not directly related to fund management, matters.

Tell them about your journey. And if your path is unconventional, even better. Unique experiences bring unique perspectives.

Pro Tip: Be genuine. LPs don’t want a perfectly polished narrative; they want authenticity. The more honest and transparent you are, the better. Don’t try to create a story that isn’t yours.

2. Fund Overview

When it comes to your fund, the LPs want one thing: to understand how you plan to make money. How will you deploy capital? What are the risks? What’s your strategy?

This isn’t the time to be vague. It’s not a place to throw out buzzwords like "disruption" or "innovative." Be clear about your investment thesis. What industries are you focusing on? What stage of companies are you investing in? How do you expect to generate returns?

Emerging managers often feel pressure to over-explain or complicate things to sound sophisticated. Don’t. Simplicity is your friend. A clear, well-thought-out strategy is far more convincing than an overly complex one.

Pro Tip: Use examples — not hypotheticals, but real-world scenarios. If you’ve done deals, explain them. If not, walk through how you would approach them. LPs appreciate clarity over complexity.

3. Succession Planning & Key People

When LPs invest in your fund, they’re not just investing in you; they’re investing in your team. But what happens if you, as the fund manager, aren’t around tomorrow? What happens if a key person leaves?

Succession planning is a hard conversation to have, but it’s an important one. LPs want to know that you’re not just a one-person show. They want to know that your team is structured in a way that allows the fund to run smoothly no matter what happens.

Pro Tip: Be honest. If you don’t have a succession plan yet, that’s okay — but talk about how you’re planning to build one. If you have one, make sure it’s clear and reasonable.

4. Investment Process

Emerging fund managers sometimes feel like they have to be secretive about their investment process to make it seem sophisticated or proprietary. But in reality, LPs want to know that you have a system in place. They want to know how you source deals, how you evaluate them, and what metrics or tools you rely on.

Think about it this way: The more systematic and repeatable your process is, the more confident LPs will be in your ability to deliver consistent results. That’s not just about making the right bets; it’s about making them in the right way, every time.

Pro Tip: Demonstrate your decision-making process. Walk through how you evaluate opportunities, the types of questions you ask, and how you make those tough calls. LPs want to know that you won’t be swayed by gut feeling or personal bias.

5. Alignment of Interests

This is critical: LPs want to know that you’re in it for the long haul. They’re looking for “skin in the game.” Do you have personal capital committed to the fund? How much?

The general rule is simple: If you don’t believe in your fund enough to put your own money in it, why should they?

But don’t just talk about your GP commitment. Be transparent about your fee structure and how it aligns with LP returns. A fee structure that rewards performance (not just management) shows that you’re committed to growing the fund, not just collecting fees.

Pro Tip: Show why the amount you’ve committed makes sense for both you and your LPs. LPs respect transparency and alignment over anything else.

6. Reporting & Transparency: Build Trust Through Openness

LPs don’t want to feel like they’re throwing money into a black box. They want to know what’s going on at all times. What’s your reporting cadence? How frequently will you provide updates on fund performance? How do you plan to communicate with LPs?

This is your chance to showcase your commitment to transparency.

If you can, share sample reports. Show them what they can expect to see, how you’ll update them on the status of the fund, and how you’ll communicate important changes.

Pro Tip: Be proactive in your communications. The best-emerging managers over-communicate, especially in the early stages. If you can, anticipate LPs’ questions before they even ask.

7. ESG: Do What’s Right, Not Just What’s Popular

More and more LPs are looking at Environmental, Social, and Governance (ESG) factors. Some will expect it to be a core part of your strategy, others might not care as much. But no matter where you stand, don’t try to greenwash.

If ESG is central to your strategy, explain how and why. If it’s not, be upfront about that too.

Pro Tip: ESG is a long-term play. Don’t just focus on what’s trendy right now. Talk about how your investments will make a difference over time.

8. Technology, Security, and Third Parties: Keep Their Data Safe

LPs are investing in your ability to execute — and part of that is your ability to keep their data safe. They want to know how you’re handling sensitive information. What technology do you use? How secure is it?

This might not be the most exciting part of the DDQ, but it’s critical. If they can’t trust you to handle their data securely, they won’t trust you with their capital.

Pro Tip: If you don’t have all the answers yet, show that you’re building the infrastructure with the right partners and security protocols. Demonstrating foresight in this area goes a long way.

Final Thoughts: It’s Not Just About the Answers — It’s About the Relationship

The LP DDQ is not just about answering questions; it’s about building a relationship. Yes, LPs want to know you can execute a strategy, but they also want to know they can trust you. Trust takes time, but answering the DDQ thoughtfully and transparently can set the foundation for a long-term partnership.

You don’t need to be perfect. But you do need to be real. That’s the difference between winning an LP’s trust and losing it.

The Ultimate LP DDQ for Emerging Fund Managers

1. Firm Overview

• 1.1 Please provide a brief history of your firm and its founding team.
• 1.2 What motivated you to start this fund, and why do you believe this is the right time to launch?
• 1.3 Describe the backgrounds of the key members of your team, and how their experience supports your fund’s strategy.
• 1.4 What is the long-term vision for your firm?
• 1.5 Have you or any of your team members been involved in previous funds or successful exits? Please provide details.

2. Fund Overview

• 2.1 What is your investment thesis? What industries or sectors do you target?
• 2.2 What stage of companies will you invest in (seed, Series A, etc.)?
• 2.3 What is the size and target capitalization of your fund?
• 2.4 What is your target geographic focus (domestic, international, specific regions)?
• 2.5 How do you plan to generate returns for your LPs?
• 2.6 What differentiates your investment strategy from that of your competitors?
• 2.7 What is your expected time horizon for the fund, and what is your exit strategy?

3. Succession Planning & Key People

• 3.1 Do you have a succession plan in place for key personnel? If not, what steps are you taking to create one?
• 3.2 How does your team structure and responsibilities ensure continuity in case of leadership transitions?
• 3.3 Who are the key members of your team, and what are their roles? What makes them essential to the success of the fund?

4. Investment Process

• 4.1 Please describe your deal sourcing process. How do you find and identify investment opportunities?
• 4.2 What is your evaluation process for investments? Please outline the criteria you use to assess a potential deal.
• 4.3 How do you approach due diligence on potential investments?
• 4.4 What metrics or tools do you rely on to make investment decisions?
• 4.5 How do you handle conflicts of interest during the investment decision-making process?

5. Alignment of Interests

• 5.1 What percentage of personal capital have the General Partners (GPs) committed to the fund?
• 5.2 How does your fee structure align with the interests of LPs? (e.g., management fees, carried interest)
• 5.3 Can you provide a detailed breakdown of your fee structure and carried interest terms?
• 5.4 How do you incentivize your team and ensure alignment with LPs' goals?

6. Reporting & Transparency

• 6.1 What is your reporting cadence, and how will you keep LPs updated on fund performance and activities?
• 6.2 How do you plan to communicate material changes or updates regarding the fund’s performance?
• 6.3 Please provide examples or templates of the reports that LPs will receive.
• 6.4 How do you ensure transparency and honesty in your reporting, particularly during difficult periods?

7. ESG: Environmental, Social, and Governance

• 7.1 Does your fund integrate ESG factors into its investment strategy? If so, how?
• 7.2 What specific ESG metrics or criteria do you evaluate when considering investments?
• 7.3 How do you monitor and measure the ESG impact of your portfolio companies?
• 7.4 If ESG is not a central focus of your fund, why is that the case?

8. Technology, Security, and Third Parties

• 8.1 What technology platforms or systems do you use to manage the fund’s operations, deal flow, and LP communications?
• 8.2 How do you ensure the security and confidentiality of sensitive data and information related to LPs and investments?
• 8.3 What third-party service providers do you rely on (e.g., auditors, legal, compliance)? How do you vet these providers?
• 8.4 Do you have data protection protocols in place to mitigate risks and ensure compliance with relevant regulations?

9. Risk Management & Compliance

• 9.1 How do you identify, assess, and manage risks within the fund’s portfolio?
• 9.2 What measures do you take to ensure compliance with applicable laws and regulations?
• 9.3 How do you monitor the fund’s risk profile, and what steps do you take to mitigate potential downside risks?

10. Fund Performance & Track Record

• 10.1 What is your expected return profile for LPs? Please provide any performance targets, benchmarks, or historical returns (if applicable).
• 10.2 Have you or any of your team members managed funds previously? If so, what was the performance of those funds?
• 10.3 What metrics do you use to track and measure fund performance over time?
• 10.4 How do you handle underperforming investments, and what steps are taken to turn them around?

11. Legal & Regulatory Compliance

• 11.1 Are you fully compliant with all relevant regulatory requirements (e.g., SEC, FCA, local laws)?
• 11.2 Have you been involved in any legal or regulatory issues or investigations? If so, please explain.
• 11.3 What is your process for ensuring ongoing compliance with applicable laws and regulations?

About Taghash

Taghash helps emerging fund managers build lasting relationships with their LPs through a dedicated LP communication portal. This secure platform allows LPs to access portfolio data, key documents, and performance reports effortlessly. With features like streamlined reporting, customizable templates, real-time updates, and centralized document management, the portal ensures a seamless and transparent experience. By offering a professional and cohesive solution for LP engagement, Taghash makes trust-building simple and effective.

Beyond LP communication, Taghash provides an end-to-end platform for venture funds, private equity, fund of funds, and other alternative investment funds. Over the last seven years, we have served as the tech arm for top VCs, helping them manage operations across deal flow, portfolio, fund, and LP management. Trusted by leading fund managers like Blume Ventures, Kalaari Capital, and A91 Partners, we enable our clients to achieve greater success. Click here to book a demo.