LP Due Diligence Checklist for Fund Managers 2026

By Dawid, Founder of Altss. Writing about allocator intelligence and fundraising strategy.

LP diligence in 2026 runs on two parallel tracks — Investment Due Diligence (IDD) and Operational Due Diligence (ODD) — and both must pass independently before capital moves. An estimated 85% of LPs rejected a manager over operational concerns alone in 2025, response windows have compressed from 14 days to 7, and the average DDQ now spans 21 sections and 250+ questions. This article documents what LPs evaluate, the documents they require, the failure points that kill allocations before investment committee, and the limitations of any standardized diligence framework.

Why does diligence preparation matter more than targeting?

Altss has published guides on how to raise a fund without a placement agent, how to land an anchor investor, how to approach family offices, how to work with fund-of-funds, and the First-Time Fund Manager Playbook. All of those assume GPs can pass diligence. None of them explain what diligence actually looks like from the allocator's side.

Most GPs experience diligence as an inbound process: an LP sends a DDQ, you respond, and either you advance or you do not. What is less visible is the framework LPs use to evaluate responses — the scoring rubrics, the red flags that trigger immediate rejection, and the operational baselines that separate managers who get to investment committee from managers who get a polite "not right now."

This article is written from the LP's evaluation perspective, using the ILPA DDQ 2.0 framework as the structural backbone. ILPA's DDQ is now the de facto standard for private equity diligence — an estimated 87% of PE funds receive questionnaires aligned to the ILPA framework. In 2025, ILPA developed new modules tailored to private credit, real estate, infrastructure, and emerging managers, plus a joint PRI Climate Module for responsible investment diligence.

What is the two-track diligence framework?

Institutional diligence is not a single process. It is two parallel evaluations — and both must pass independently.

Investment Due Diligence (IDD) evaluates whether the strategy, track record, team, and portfolio construction merit an allocation. This is the "can you generate returns" test.

Operational Due Diligence (ODD) evaluates whether the fund's infrastructure, governance, compliance, and risk management are sound. This is the "can we trust you with our capital" test.

The critical insight: a manager can pass IDD with strong returns and a compelling thesis — and still fail ODD over a missing valuation policy, inadequate insurance coverage, or an incomplete compliance program. An estimated 85% of LPs have rejected a manager over operational concerns alone, and 79% have significantly deepened their operational scrutiny in the past year. ODD failures are silent killers. GPs do not get a second chance to fix them mid-process.

What this framework does not capture

The IDD/ODD framework describes institutional best practice, not universal LP behavior. Many family offices — particularly those where the principal makes decisions personally — do not run formal ODD at all. Some fund-of-funds weight ODD more heavily than IDD. Consultant-driven processes may add a third track (ESG/climate diligence) that functions as an independent gate. The framework below reflects what institutional allocators evaluate at scale; individual LP processes will vary.

What do LPs evaluate in Investment Due Diligence?

How do LPs assess strategy and thesis?

LPs evaluate whether the investment mandate is specific enough to generate returns and consistent enough to underwrite over a fund cycle. They want a thesis a GP can state in two sentences: "We invest in [segment] because [structural insight] creates [specific opportunity] that [competing capital] misses." If the thesis requires a paragraph, it is not crisp enough.

They ask how the thesis evolved since the last fund. Consistency matters. A GP that pivoted from fintech in Fund I to climate in Fund II raises a question about whether they are chasing returns or executing a conviction. They ask for a bottoms-up market map of the addressable opportunity set — not a top-down TAM slide — including how many deals per year the GP evaluates and the conversion rate. They ask what happens when the macro environment changes: if the thesis depends on low interest rates, what is the playbook in a 5%+ rate environment?

What passes: a thesis that is specific, evidence-based, and has a clear "why us" connecting team experience to the opportunity set. What fails: generic theses ("we invest in great companies at good prices"), strategy drift between funds, inability to articulate what the GP does not invest in.

How do LPs evaluate track record attribution?

This is where institutional diligence separates from family office diligence. Family offices may accept a narrative-level track record discussion. Institutional LPs require deal-by-deal attribution. The Family Office Investment Criteria Framework documents how these evaluation standards differ by allocator type.

LPs require gross and net returns by vintage year — gross IRR, net IRR, DPI, RVPI, TVPI. They will calculate all four even if the GP provides only two, and inconsistencies between self-reported and calculated metrics are an immediate red flag. They require deal-by-deal returns with entry date, exit date, invested capital, and realized value — not a summary, every deal, including the losses. LPs look at loss ratios as carefully as wins; a fund with zero write-offs is either too early to evaluate or not being transparent.

The hardest question for GPs transitioning from a larger platform: "What was your personal attribution on each deal?" "I was involved" is not attribution. LPs want to know whether the GP sourced it, led the underwriting, sat on the board, or drove the exit. Attribution is the single biggest diligence challenge for spin-out teams. LPs also compare fund returns against the relevant vintage-year benchmark — if gross TVPI is 1.5x and the benchmark median is 1.7x, the GP needs a clear explanation.

What passes: complete deal-by-deal data with verifiable attribution, clean loss documentation, and benchmarking context. What fails: summary-level returns only, inability to attribute specific deals to the current team, track record carried forward from a prior firm without clear documentation of the individual's role.

How do LPs assess teams?

LPs invest in teams, not strategies — because strategies are replicable, but teams are not.

Key person risk. How concentrated is the investment decision-making? If one partner sources 70% of deals and manages all LP relationships, the fund has single-point-of-failure risk. LPs evaluate how many investment professionals make independent decisions, and what happens if a key person leaves.

Economics and alignment. How is carry distributed? LPs are suspicious of economic structures where junior team members have no meaningful carried interest — because those team members have no economic incentive to stay. They also evaluate GP commitment: the industry standard is 1–5% of fund size, and LPs view the GP's personal capital at risk as a signal of conviction. A GP committing $500K to a $200M fund is not aligned with LPs committing $10M each.

Culture and governance. LPs evaluate whether the GP has a documented decision-making process, an investment committee with defined voting procedures, and a clear escalation path when partners disagree. The absence of any of these is not disqualifying on its own, but the absence of all three raises questions about institutional maturity.

How do LPs evaluate portfolio construction?

Beyond individual deals, LPs evaluate how the GP builds a portfolio — and whether the construction matches the thesis.

They assess concentration versus diversification: how many investments per fund, what the maximum position size is, and whether the numbers are consistent with the stated strategy. A fund thesis predicated on "concentrated, high-conviction investing" with 30 portfolio companies raises questions about conviction depth. They evaluate reserves and follow-on strategy — what percentage of the fund is reserved for follow-ons — because LPs who have been burned by GPs over-concentrating into winners or averaging down into losers evaluate this carefully. They assess valuation discipline: what entry multiples the GP targets, and what the underwriting case, base case, and downside case look like on a representative deal.

What do LPs evaluate in Operational Due Diligence?

ODD has expanded dramatically. Where it once focused on fund administration and audit, it now covers compliance, cybersecurity, business continuity, ESG governance, and DEI policies. The ILPA DDQ 2.0 includes 21 sections, and in 2025, ILPA and PRI jointly released a supplementary Climate Module for responsible investment diligence.

How do LPs evaluate fund administration and reporting?

Three questions dominate. First, does the GP use a third-party administrator? If the GP self-administers, LPs need a very good explanation of why — most institutional allocators require third-party fund administration as a baseline governance control. Second, what is the reporting cadence and format? Quarterly reporting is standard, ILPA-compliant templates are increasingly expected, and LPs want DPI, RVPI, TVPI, and IRR reported consistently with methodological notes. Third, who audits the fund and what is the audit opinion? Big Four or established alternatives-specialized auditors are preferred. A qualified or adverse audit opinion is a dealbreaker.

What valuation standards do LPs expect?

A written valuation policy is not optional — it is a prerequisite. The policy should specify methodology (comparable transactions, DCF, market multiples), independence (who reviews valuations and how conflicts are managed), and consistency across the portfolio.

LPs are particularly alert to asymmetric valuation behavior — marking up quickly when a comparable raises at a higher price, but slow to mark down when conditions deteriorate. TVPI credibility depends entirely on valuation discipline. This is an area where LPs cross-reference reported valuations against public market comparables and secondary market pricing; inconsistencies are surfaced, not missed.

What compliance and cybersecurity standards do LPs require?

LPs verify SEC registration status and any disciplinary history through public filings. Altss tracks Form ADV filings across all SEC-registered advisers as part of its OSINT regulatory layer — and this is the same public data that LP diligence teams reference.

They want to see a designated Chief Compliance Officer, written compliance policies, annual reviews, and a clear process for handling conflicts of interest. On cybersecurity, SOC 2 Type II certification or equivalent has become a near-requirement for institutional allocations. LPs ask whether the GP conducts annual penetration testing, what the incident response plan is, and how LP data is stored and protected. LP surveys consistently rank cybersecurity as the number one operational gap among emerging managers. AML/KYC procedures should be documented, current, and covering all relevant jurisdictions.

What insurance and business continuity do LPs expect?

If the fund has key person provisions in the LPA but no key person insurance, that is a governance gap. LPs expect at minimum Errors & Omissions (E&O), Directors & Officers (D&O), and Cyber Liability coverage. They evaluate whether the GP has a business continuity plan — where data is backed up, what the failover plan is if the primary office is unavailable, and whether the plan has been tested.

How do LPs evaluate conflicts of interest?

LPs evaluate three areas. Deal allocation policy: how the GP allocates deals between the current fund, any co-investment vehicles, and any parallel vehicles — and whether the process is documented and fair. Related-party transactions: any fees paid to GP-affiliated entities, any investments in GP-related companies, any outside activities. Outside activities themselves: board seats, advisory roles, other fund management activities. Undisclosed conflicts erode trust faster than almost any other diligence failure.

What does the complete data room require?

When an LP advances to deep diligence, they expect access to a secure, organized data room containing documents across four categories.

Investment documents: the private placement memorandum (PPM), limited partnership agreement (LPA), subscription agreement documents, side letter template, and co-investment policy if applicable.

Operational documents: the written valuation policy, compliance manual, code of ethics and personal trading policy, business continuity plan, cybersecurity framework documentation, insurance certificates (E&O, D&O, Cyber), SOC 2 Type II report if available, completed ILPA DDQ, and completed ILPA Fee Reporting Template.

Financial documents: audited financial statements for all prior funds, unaudited quarterly reports for the current fund, deal-by-deal track record with attribution, GP commitment documentation, fee and expense calculations, and portfolio company financial summaries.

Reference materials: an LP reference list of 5–8 current investors willing to take calls, a portfolio company CEO reference list of 3–5 contacts, and prior employer or platform references for first-time fund managers.

If any of these documents does not exist, build it before starting the fundraise.

What this checklist does not cover

Data room completeness is necessary but not sufficient. Some LPs will request items not on any standard checklist — proprietary analytics on portfolio construction, stress-testing scenarios against specific macro variables, or detailed documentation on how the GP handled a specific prior situation. The ILPA framework provides structure, but individual LP diligence processes are shaped by that LP's own history of what went wrong in previous fund commitments. GPs should treat this checklist as the baseline, not the ceiling.

What are the failure points that kill allocations?

These are the specific reasons LPs pass on managers who otherwise have compelling strategies and track records.

Incomplete data room. The LP asks for the compliance manual and the GP needs two weeks to write one. That delay — and what it signals about operational maturity — ends the process.

Attribution that does not survive scrutiny. The GP claims a 3.2x MOIC on a deal from a prior firm, but the reference call reveals they joined the board two years after the investment was made. The attribution does not hold.

Inconsistent valuations. The Fund I portfolio shows a 2.5x TVPI, but individual deal valuations are based on different methodologies applied inconsistently. The portfolio-level number is not trustworthy.

No operational infrastructure. No third-party administrator, no written valuation policy, no compliance manual, no cybersecurity documentation. This is a fund that is not ready for institutional capital, regardless of returns.

Misaligned terms. Management fees above market (typically 1.5–2.0% for funds under $1B), no GP commitment or a de minimis commitment, carry on unrealized gains without a preferred return hurdle, or no clawback provision. LPs benchmark terms against ILPA principles and industry norms.

Poor reference calls. LPs call existing investors and portfolio company CEOs. If existing LPs are lukewarm — or if the GP cannot produce 5+ willing references — the process stalls.

Evasive answers on losses. Every fund has deals that did not work. LPs expect transparency about what went wrong, what the GP learned, and what process changes resulted. A GP who cannot discuss losses openly triggers skepticism about what else might be undisclosed.

What these failure points do not explain

This list describes common patterns, not universal rules. Different LP types weight different factors. A family office principal investing from personal conviction may overlook a missing compliance manual if the thesis and relationship are compelling. An endowment with a dedicated ODD team may reject a manager whose data room is complete but whose cybersecurity posture does not meet their specific standard. Context matters — and GPs who treat diligence as a checkbox exercise rather than a conversation about trust miss the point.

How does diligence differ by LP type?

Not all allocators run the same process. Understanding the LP decision cycle differences helps GPs manage pipeline expectations.

Endowments and pension funds run the most thorough process, typically 6–18 months. Board and investment committee approval cycles extend timelines. Consultant involvement adds another layer. Full ODD is standard. For a complete map of endowment governance and timing, see Endowments and Foundations as LPs.

Fund-of-funds run the most technically rigorous diligence, typically 3–6 months. FoF teams evaluate managers professionally and continuously — they know what questions to ask. GPs should expect quantitative analysis of return attribution, portfolio concentration, and risk decomposition that goes beyond what most direct LPs perform.

Family offices vary enormously — from 2 weeks to 12 months. A single-family office with an experienced CIO may conduct institutional-grade diligence in 4–8 weeks. A family office where the principal makes decisions personally may commit after a single meeting — or may take 12 months of relationship-building. The Family Office Targeting Strategy maps these behavioral differences in detail. Altss covers 9,000+ family offices with OSINT-derived profiles that include decision-chain structure and mandate signals — intelligence that helps GPs calibrate which diligence format to prepare for each allocator.

Investment consultants (Cambridge Associates, NEPC, Wilshire, Meketa, Aon, Mercer) maintain continuously updated approved lists. Getting on the list requires its own multi-month diligence process — but once approved, the GP gains access to the consultant's entire client base.

RIAs and OCIOs are increasingly significant as alternatives gatekeepers, typically running 3–6 month processes. RIAs managing client portfolios with alternatives allocations run standardized diligence across multiple managers simultaneously.

What has changed in LP diligence in 2025–2026?

Three structural shifts are reshaping how LPs conduct diligence.

ODD now weighs as heavily as IDD. The finding — 85% of LPs rejecting managers on operational grounds — reflects a post-2020 reality where cybersecurity breaches, valuation scandals, and compliance failures at fund managers have made operational infrastructure a gating factor. Industry data suggests approximately 50% of fund closures result from operational failures rather than poor investment performance. This is not a temporary trend; it is a structural shift in how institutional capital evaluates risk.

DDQ volume has exploded. The average PE fund now responds to 150+ DDQs annually during fundraising, up roughly 40% from five years ago. Each averages 250 questions across 21 categories. Response windows have compressed from 14 to 7 days. GPs who manage DDQs manually are at a structural disadvantage against firms that maintain pre-built, modular response libraries. This operational burden is itself a form of adverse selection — smaller managers without dedicated IR teams are disadvantaged regardless of investment quality.

ESG and climate diligence is now standard at the institutional level. The 2025 PRI-ILPA Climate Module added a dedicated set of climate-related due diligence questions to the ILPA framework. For GPs raising in 2026, having at minimum a documented ESG approach is no longer optional for institutional allocations. The extent of ESG diligence varies significantly by LP type — European institutional LPs and foundations with mission-related mandates apply the most rigorous standards, while many US family offices treat ESG as informational rather than gating.

What these trends may not predict

The 85% rejection figure is self-reported by LPs and may overstate actual behavior — LPs have incentives to present themselves as rigorous. DDQ compression may plateau as GPs adopt AI-assisted response tools. ESG diligence requirements could shift with political and regulatory changes. GPs should build for the current standard while monitoring how it evolves.

What should GPs do before starting the fundraise?

The most common mistake in fundraising is not a bad thesis or weak returns. It is starting the process before the operational infrastructure is ready.

Build the data room. Write the valuation policy. Complete the ILPA DDQ. Engage a third-party administrator. Document the compliance program. Get SOC 2 underway — the process takes 6–9 months, so start early. Prepare reference lists. Calculate deal-by-deal attribution with supporting documentation that survives cross-referencing against reference calls.

Then — and only then — start booking LP meetings. The Altss family office and institutional investors database provides OSINT-derived intelligence on 9,000+ family offices and institutional LPs — endowments, pensions, foundations, insurers, sovereign wealth funds, OCIOs, and fund-of-funds — with verified decision-maker contacts and timing signals built on public filings, news monitoring, and professional activity. The LP targeting framework scores and prioritizes prospect lists by mandate fit, timing, and access quality. But the best-timed outreach in the world fails if the diligence package is not ready when the LP says yes.

FAQ

What is the ILPA DDQ? The Institutional Limited Partners Association Due Diligence Questionnaire is the de facto standard for private equity diligence. Updated to version 2.0 in 2021, it spans 21 sections covering strategy, track record, team, operations, compliance, ESG, and DEI. In 2025, ILPA added modules for private credit, real estate, infrastructure, and emerging managers, plus a joint PRI Climate Module. Approximately 87% of PE funds receive questionnaires aligned to this framework.

How long does LP diligence take? Varies by LP type. Endowments and pensions: 6–18 months. Fund-of-funds: 3–6 months. Family offices: 2 weeks to 12 months. Consultants: ongoing. RIAs and OCIOs: 3–6 months. GPs should plan pipeline timelines around the longest diligence cycle they are likely to encounter, not the shortest.

What is the difference between IDD and ODD? IDD evaluates strategy, returns, team, and portfolio construction — the "can you generate returns" test. ODD evaluates fund administration, compliance, cybersecurity, valuation policy, and business continuity — the "can we trust you with our capital" test. Both must pass independently. Failing ODD kills allocations regardless of IDD quality.

Do I need SOC 2 certification? It is not technically required, but it is increasingly expected by institutional LPs, particularly endowments and pensions. The process takes 6–9 months. Start before the fundraise, not during it. Some LPs will accept SOC 2 Type I as an interim step with Type II in progress.

What GP commitment do LPs expect? Industry standard is 1–5% of fund size. For a $200M fund, that is $2–10M in personal capital at risk. A de minimis commitment — or one funded primarily through management fee waivers rather than cash — weakens the alignment signal. LPs view GP commitment as a proxy for conviction.

What is the most common reason LPs pass on managers? An estimated 85% of LPs have rejected a manager over operational concerns. The most common failures: incomplete data rooms, inconsistent valuations, lack of third-party administration, and poor reference calls. Strong returns do not compensate for operational gaps at the institutional level.

How many DDQs should I expect during a fundraise? The average PE fund responds to 150+ annually during fundraising, each averaging 250 questions across 21 categories. Response windows have compressed to approximately 7 days. Maintaining a modular, pre-built response library is no longer a nice-to-have — it is an operational necessity.

Do family offices run the same diligence as institutions? Some do, some do not. A family office with a professional CIO may run the full IDD + ODD process. A family office where the principal makes decisions personally may rely more on relationship and thesis alignment, with minimal formal ODD. Altss tracks these differences across 9,000+ family offices — OSINT-derived profiles that include decision-chain structure and investment behavior — helping GPs calibrate their diligence preparation by allocator type.

What can this article not tell me about a specific LP's process? This article describes institutional best practices and common patterns. Individual LP diligence processes are shaped by that LP's history, regulatory environment, and organizational culture. An endowment that lost money to a manager with valuation issues will scrutinize valuation policy more heavily than the standard framework suggests. A family office with deep sector expertise may skip the thesis evaluation entirely and focus on terms. GPs should use this framework for preparation and then adapt to each LP's actual process through direct conversation.

The Altss family office and institutional investors database provides OSINT-derived intelligence on 9,000+ family offices and institutional LPs — endowments, pensions, foundations, insurers, sovereign wealth funds, OCIOs, and fund-of-funds — with verified decision-maker contacts, mandate signals, and timing intelligence. Every profile originates from public sources, passes through human verification, and is re-verified on a ≤30-day cadence. To see how the platform maps the allocators most likely to be receptive to your strategy, see the platform.