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Performing due diligence on a fund manager is extremely important in today's industry. Everyday, we read about some manager somewhere defrauding investors out of millions of dollars. Or, a manager may bend the truth a little on his past experience or performance statistics. Unfortunately, if a hedge fund fails, many times the manager can just close up shop and open up an entirely new fund and the investors will have no clue as to his past. Either way, a background check can alert investors of possible red flags. Many companies specialize in doing background reports and due diligence.