What is Operational Due Diligence (ODD)?
Operational Due Diligence (ODD) is the independent assessment of an asset manager’s non-investment risks, focusing on governance, organisation, risk management, operations, and controls.
The objective of ODD is not to evaluate return potential, but to determine whether an asset manager’s operational infrastructure is robust enough to protect investor capital across market cycles.
For institutional investors, failures in operational due diligence have historically been among the most severe sources of permanent capital loss.
Why ODD Often Fails in Practice
Despite its importance, many ODD processes fail to deliver meaningful risk insight.
Common shortcomings include:
Overreliance on documentation rather than observed behaviour
Checklist-driven approaches that ignore strategy-specific risks
Excessive focus on regulatory compliance instead of operational resilience
Limited understanding of private market complexity
Speed prioritised over professional judgement
As a result, investors often receive comfort without clarity, and risk without visibility.
What Defines Best-Practice ODD
Best-practice Operational Due Diligence is judgement-driven, context-aware, and risk-focused.
It combines:
Structured analytical frameworks
Deep qualitative assessment
Benchmarking against institutional best practice
Experienced professional judgement
The purpose of ODD is not to “approve” a manager, but to identify where operational risk genuinely resides and how it may evolve under stress.
Why Non-Investment Risk Management Matters
Effective management of non-investment risk reduces the likelihood of operational failures, protects investor capital, and supports more resilient long-term investment outcomes.
Lestrade’s Role - Independent operational due diligence specialists
Lestrade is the world’s leading independent Operational Due Diligence (ODD) specialist, with deep expertise in private markets and other complex investment strategies.
We support institutional investors globally by providing:
Independent, conflict-free ODD
Deep expertise in private equity, private credit, real assets, and complex strategies, next to public markets
Judgement-driven analysis rather than box-ticking
Decision-useful insight rather than binary conclusions
Our work is built on the principle that ODD is a risk management discipline, not a compliance exercise.
Institutional investors engage Lestrade to:
Assess operational risk during manager selection
Re-underwrite existing manager relationships
Support internal ODD teams through co-managed models
Gain independent perspective on complex or higher-risk strategies
Strengthen governance, risk oversight, and fiduciary decision-making
In practice, institutional clients consistently experience Lestrade’s Operational Due Diligence through the following core characteristics.
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“Lestrade flagged risks that directly influenced our allocations and, in some cases, led us to reconsider manager selection.”
— CIO, Top-10 Dutch Pension Fund
“Lestrade operates as a true extension of our internal ODD team, matching our depth while integrating seamlessly into our processes.”
— Head of ODD, Top-5 Canadian Pension Fund
Learn more about best-practice Operational Due Diligence and how institutional investors manage non-investment risk.
E-mail us your RFP at info@lestradefs.com for a tailored, friction-free Operational Due Diligence
