Investment Due Diligence

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Investment due diligence is crucial to successful returns.  Recently, in a further blow to investor confidence, we learned of the massive fraud perpetrated by Bernard Madoff. We will learn more as this story unfolds completely, but the size of the fraud and associated investor losses are spectacular. It appears that this was an enormous confidence game on behalf of Madoff. He had a position of great trust in his community and a long and apparently successful record of investing for his clients. But things are not always what they seem. It looks as though no one took the effort to verify his performance claims or the safety (or even existence) of the money that they had entrusted to his care. Many of the defrauded investors would ordinarily be considered to be very sophisticated and the lack of due diligence, especially by some of the institutional and hedge fund investors is, frankly, shocking. It’s another reminder that when things seem too good to be true, they probably are.

Our due diligence process is disciplined and rigorous and we spend a great deal of time and effort evaluating our selected managers before we commit our client’s capital to their strategies. Over the past few years, we have had opportunities to evaluate the investment offerings of a number of hedge funds and other types of private investments. While the purported track records of many of these investment vehicles were attractive on their face, the lack of transparency (secrecy) and lack of liquidity were sufficient to prevent us from recommending their addition to our client portfolios.

In addition to our due diligence process, the investments we recommend to our clients are completely transparent and highly regulated. The assets in our clients’ accounts belong to our clients, not to Horizon. Client assets are held in custody at either Fidelity or Schwab and have safeguards from any unauthorized access or trading. All activity in the accounts is reported monthly by each custodian, completely detailing all transactions to our clients.

Our role as an investment advisor is to act as a financial steward for our clients and we take this responsibility very seriously. If you have any questions or would like to learn more about the safety of your accounts or our due diligence process, please call.

Horizon Wealth Advisors
Horizon Wealth Advisors is a Houston-based, privately owned, fee-only financial advisor established in 1999. Our mission is to develop long-term relationships with thoughtful, successful individuals, families, and organizations by supporting and assisting them in achieving their financial goals.

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