In any relationship, when things are good, they’re usually pretty good. And when things are bad, sometimes they are really bad. There may come a point when you need to evaluate whether you’re still a good fit together.
Just like with a romantic relationship, your firm’s connection to a service provider (especially an infrastructure/cloud provider you rely on daily) should be strong enough to withstand a few hiccups and healthy enough to warrant open communication at all times. In some cases, it might be clear that you’re in a good place and moving forward together, but sometimes there are sure signs it’s time to call it quits.
Here are a few of those signs:
1. Your provider’s service levels are not up to snuff.
Maybe you recently experienced a major service outage or find that you not-so-conveniently have to work around confusing and interrupting maintenance schedules during work hours. You’re constantly frustrated and don’t feel like you are receiving the level of support that was agreed to – both verbally and as part of your Service Level Agreement (SLA).
Your SLA should clearly indicate the uptime standard (e.g. 99.995% availability) as well as repercussions to any breaches in the contract (for example, service credits) and associated RPOs if disaster recovery is involved
We are excited to be sponsoring the 2014 EzeSoft Client Conference later this week in Boston. For those of you who aren’t familiar, Eze Software Group is the owner of the order management system, Eze OMS, which is frequently used by hedge funds and asset managers across the globe.
As a preview to this week’s conference, we thought we’d dial it back to basics a little and explain exactly what an order management system is and why it’s a critical piece of software for many investment management firms today.
On our recent Hedge Fund Marketing and Due Diligence webinar we looked at how the hedge fund investor due diligence process is evolving especially in terms of scrutiny on technology processes and security safeguards.
The reality is that investors have a greater understanding of technology, are asking more probing questions and care about the responses they receive. We’ve even heard investors say that deficiencies in IT infrastructure and security contributed to the decisions to redeem from or not invest in a fund.
So at Eze Castle Integration we regularly assist our hedge fund clients in completing the IT portions of investor due diligence questionnaires. The wording of questions varies but here is a handy list of 51 common IT due diligence questions we see.
Provide an organization chart for the Company, its affiliates and key personnel.
Provide the physical address and general contact information for each of the Company’s office locations.
Provide the name and contact information of the Company employee(s) assigned to the client’s account(s).
Provide a list of compliance personnel, their roles and qualifications, the date of his/her appointment and position within the Company’s organizational structure.
As more and more firms compete for investor attention and allocations across the financial services industry, differentiation becomes a critical consideration. And the promise of positive returns is not always enough to secure investments in today's competitive marketplace. Now more than ever, investment firms must push the boundaries in an effort to impress and satisfy new and existing investors and emerge as premier firms. Two ways in which firms can deliver on this are through marketing and technology.
Last week, Eze Castle collaborated with Meyler Capital, a hedge fund marketing firm, to deliver a webinar on Hedge Fund Marketing Tips to Impress Investors and Raise Capital. Scroll down to watch the full replay or continue reading our brief recap.
This article first appeared in Hedgeweek's September 2014 Special Report on Risk Management.
Cyber security has quickly become a headline risk for hedge fund managers. On 15 April 2014, the SEC issued its Cyber-Security Risk Alert, a detailed 26-point questionnaire that aims to address various elements of a hedge fund’s technical and operational infrastructure to determine how vulnerable it is to cyber attacks and data theft.
This initiative is being driven by the SEC’s Office of Compliance Inspections and Examinations. It will assess 50 individual firms and based on its findings will draft a set of final guidelines for hedge funds to adhere to. This is essentially a way to address ‘technology risk’ and implement best practices through documentation in the form of a Written Information Security Policy (WISP).
According to Assured SKCG Inc, an insurance advisory firm, 37 per cent of security breaches between 2012 and 2013 affected financial organisations. Hedge funds are a high profile target. Establishing a WISP and becoming as data secure as possible is critical.
At Eze Castle Integration, the phones haven’t stopped ringing as clients look to address any gaps in their IT infrastructure and operational policies.
The North American Securities Administrators Association (NASAA) recently released survey results of cybersecurity practices of 440 registered investment adviser firms across nine states. The purpose of NASAA’s pilot project was to better understand cybersecurity practices of state-registered investment advisers, how they communicate with clients and what types of policies and procedures they currently maintain. Of those surveyed, 47% have assets under management of less than $25 million, 37% manage more than $25 million and 16% do not manage assets. In today’s post, we will share our favorite graphics and findings from the organization’s survey.
Client Contact via E-mail and Use of Secure E-mail
NASAA's survey reported 92% of investment firms contact clients through e-mail and/or other electronic messaging and only 54% of that group utilizes secure email. While 14% were unsure, a staggering 30% responded that they did not utilize secure messaging whatsoever.
Cybersecurity is a hot topic -- and rightfully so -- as headlines tout new vulnerabilities or incidents with increasing frequency. In the fight to prevent attacks, technology safeguards are typically the focus. A firm must have layers of security that include, but are not limited to, anti-virus, firewalls, intrusion detection systems and Internet monitoring and reporting, as well as procedures that restrict and monitor access.
However beyond technology, the role employees play cannot be underestimated. The reality is that employees can be one of a firm’s best lines of defense or weakest link. The deciding factor in which way it swings often comes down to access control policies and cybersecurity training.
Getting the Access Right
Employees require access to the data necessary to complete their job functions. But beyond that, firms should be limiting what data employees have access to. It’s not about not trusting your employees, but more so about not trusting the technology behind those employees. The less data employees can get to, the less damage can be done via an internal breach or external hack.
The SEC Cybersecurity Risk Alert issued in April 2014 highlights the importance of access control by asking about the controls a firm maintains to “prevent unauthorized escalation of user privileges” and how firms “restrict users to those network resources necessary for their business functions.”
Part of a firm’s cybersecurity planning must be defining how company data is protected, where it is located and who has and needs access. Once access levels are defined, they must be reviewed at least annually to ensure adherence firm wide.
Security has been THE topic of 2014 thus far and was amped up last week when many A-list celebrities’ phones were hacked and racy photos released. The hack was allegedly the result of an iCloud infiltration, prompting many Apple users to question the company’s privacy settings. In response, Apple CEO Tim Cook released a letter to consumers, and the company’s website will now feature a privacy section:
Apple’s privacy site includes details on both the built-in security features within Apple devices as well as how users can manage their own privacy settings and tailor them to individual needs. Here is a brief snapshot of some security functions highlighted:
Built In Privacy
iMessages and FaceTime calls are protected with end-to-end encryption
iMessages and SMS messages are backed up to iCloud, but can be turned off by the user
All iCloud content is encrypted in transit and when stored (in most cases)
iCloud Keychain allows users to create strong passwords and stores them securely without giving Apple access
Safari blocks third-party cookies on all devices and offers private browsing
We’ve tapped the expertise of nine experts in the hedge fund startup space to share their thoughts on a range of topics specific to emerging hedge fund managers. Below are some highlights, and you can read the entire Emerging Managers Insight Series eBook here.
Set a realistic schedule to launch and don’t rush to get the hedge fund up and running too quickly. Take the time to partner with the right service providers that will support your business from the start and as you grow.
Budget for a marketer in your first two years of operation. If you look at the largest funds in the industry, they all have substantial investor relations teams that keep current investors informed while prospecting for future investors.
Capital introduction is a much sought after service from prime brokers which can be very helpful in providing a new hedge fund exposure to potential investors. Take advantage of introductions and begin to build relationships with potential investors.
Last week our SVP of client technology, Steve Schoener, presented at a hedge fund due diligence event on the topic of protections in the cloud.
Since cloud security and ensuring a hedge fund’s data is protected is such a hot topic we thought we’d share his presentation. In a nutshell, the presentation looks at the layers of security that should be built into a cloud environment, which includes deep and detailed practices around:
Principle of Defense in Depth
Principle of Least Privilege
Audit & Logging
Secure User Authentication Protocols & Encryption