Question 1 of 30
\"Northwood Investments,\" a well-established investment management firm specializing in traditional equity and fixed-income portfolios, is contemplating expanding its service offerings to include portfolios with a significant allocation to alternative investments such as private equity, hedge funds, and real estate. Alistair Humphrey, the Chief Compliance Officer, raises concerns about the firm\'s operational readiness and compliance infrastructure to support these complex investment strategies. Before Northwood Investments can offer these new portfolios to clients, which of the following actions is MOST critical to ensure the firm adequately addresses the operational risks and compliance requirements associated with alternative investments, considering the regulatory landscape and best practices for portfolio management?
Conduct a comprehensive due diligence review of the alternative investment managers and assess the firm's internal systems' capability to handle the unique complexities of alternative investments.
Immediately launch a marketing campaign targeting high-net-worth individuals interested in alternative investments to gauge market demand and generate initial capital.
Reallocate existing staff from the equity and fixed-income departments to the alternative investments team without providing specialized training on alternative investment strategies.
Reduce the firm's overall compliance budget to offset the anticipated higher costs associated with managing alternative investments, assuming that existing compliance procedures are sufficient.

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