How to run private fund due diligence like a reviewer

I have reviewed manuscripts for more than thirty journals. The habit is always the same. Skip the abstract. Go straight to the methods, because that is where the paper either holds up or falls apart.

Then a fund pitch lands in your inbox and the habit disappears. The deck opens with a big number, and most of us read that number the way we would never read an abstract.

First, the words, because they get thrown around and nobody stops to explain them. An investment fund is a pot of money collected from many people and run by someone who invests it on their behalf. That is the entire idea. Every other name is just a label for what the pot buys. A venture fund buys small stakes in young private companies. A private equity fund usually buys whole mature businesses. A real estate fund buys property. A hedge fund mostly trades public markets.

So a venture fund is one kind of investment fund, the way a cardiologist is one kind of physician. Same skeleton, different specialty.

The person running it is the general partner, or GP. You are a limited partner, or LP, which means you put money in, you have no vote on what gets bought, and you cannot ask for it back early. When people say “private fund,” they mean any of these that is not sold on a public exchange. The questions below work on all of them.

You already own the skill to ask those questions. It just needs to be pointed at a different document. Here is the translation.

The methods section becomes the strategy. What exactly does this manager do, and could someone repeat it? “We back great founders” is not a method. “We invest at seed stage in medical devices, we lead the round, and we take a board seat” is one. If you cannot restate their process in your own words, they do not have one.

Sample size becomes the number of investments behind the track record. A manager showing you 3 wins out of 8 deals is showing you an n of 8. You would not accept a treatment claim from 8 patients. The same standard applies here.

Selection bias becomes cherry-picking, and this one is not a theory. Securities and Exchange Commission (SEC) examiners reported that private fund advisers “only marketed a favorable or cherry-picked track record of one fund or a subset of funds.” The federal marketing rule is built around this problem. If a manager shows results from a slice of the portfolio, the rule says they have to provide the results of the whole portfolio it came from. If they show returns before fees, they have to show returns after fees with equal prominence.

So the question is simple. What am I not being shown?

The best version of that question already exists in writing. The Institutional Limited Partners Association publishes a free due diligence questionnaire that big investors use. One question in it is worth the entire download. It asks the manager to provide three to five examples of investments that returned less than the money put in.

That is the null-results question. Every physician understands why it matters. Nobody publishes their failures unless asked.

Conflicts of interest become the fee structure. A manager earns a management fee whether your money grows or not, and a share of profits only if it does. That is not shady; it is the standard deal. What matters is whether they can explain it clearly, and what they earn if the fund merely breaks even.

Peer review becomes the outside parties. Who audits the fund? Who administers it, meaning who actually keeps the books and calculates what your stake is worth? Are those firms independent of the manager, or friends of the manager?

Check this yourself. The Public Company Accounting Oversight Board lets anyone search registered audit firms for free. Type in the auditor’s name.

That sounds paranoid until you read the case. In September 2024, the SEC charged a fund principal who sold investors on a trading strategy his partners had supposedly used successfully. He never verified that background. Investors got fraudulent supporting documents, and the people behind them were separately charged with faking audit reports and impersonating an auditor by email. The fund raised about $16 million first.

Reproducibility becomes one question asked out loud. Why did each win happen? A manager who can walk you through what they did between the check and the exit has a process. One who describes luck in the language of skill will not survive the question.

External validity becomes the hardest question. Does the record you are looking at describe what will happen to your money? The marketing rule has a whole section on this, because managers routinely show results earned somewhere else. It requires that the people who actually produced those past results are managing money at the new firm. Ask directly which deals this specific person led.

Now the part that should change how you approach all of this. In June 2024, a federal appeals court struck down the SEC’s private fund rules. Those rules would have required every private fund to send investors quarterly fee and performance statements and to get an annual audit. The SEC confirmed in October 2024 that they are gone and they have not been replaced.

So there is no guaranteed audit. There is no guaranteed statement. Your leverage is almost entirely before you sign, not after.

One more thing. The Financial Industry Regulatory Authority (FINRA) reported this year that brokerage firms selling private deals failed to check whether a fund actually held the shares it claimed. If firms with compliance departments skip that step, assume nobody has verified anything for you.

The checklist. Ten questions, in the order I would ask them.

• What is the strategy, stated tightly enough that I can name something you would not invest in?
• How many investments make up this track record?
• Show me three to five that returned less than the money in, and tell me why.
• Which of these deals did you personally lead, and what did you do after the money went in?
• Are the results you are showing me before or after all fees?
• What do you earn if this fund just breaks even?
• Who audits the fund, and who administers it?
• Which three investors from your last fund can I call without you introducing us?
• How much of your own money is in this fund?
• What has to go right for this to work, and what is most likely to go wrong?

I did not learn diligence in finance. I learned it building systematic reviews, where the whole job is deciding which evidence counts. Looking at a company now, I ask the same four things I asked as a reviewer. What was the question, what is the evidence, what are the confounders, and is the effect big enough to matter.

None of this makes you an investor. It makes you a reader who does not stop at the abstract. That has always been the harder skill, and you already have it.

Harsha Moole is an internal medicine-trained physician-scientist with more than 100 peer-reviewed publications, including work featured in the New England Journal of Medicine. After years of clinical practice and gastroenterology outcomes research, he made an unconventional transition from the bedside to the boardroom by founding PhysicianEstate, a health care-focused venture capital firm.

Over the past seven years, Dr. Moole has made 22 early-stage health care investments across digital health, medical devices, biotech, and therapeutics. He has also built a network of more than 200 physicians from institutions such as Johns Hopkins and Stanford who help source opportunities and provide clinical diligence before capital is deployed. His core thesis is that physician-scientists with firsthand clinical experience are uniquely positioned to identify health care investments that generalist investors often miss.

His research background is reflected in his publication record on Google Scholar, and he shares professional updates on LinkedIn.