Investment Insights - Top 10 Takeaways (November 2015)

12.09.15

Winstead hosted the first Investment Insight discussion in November 2015.  The topic discussions included: offshore fund formation, compliance and institutional investor due diligence.

The following are the Investment Insights - Top 10 Takeaways:

  1. Cybersecurity is more than a compliance issue, it is a business issue for all businesses, including investment advisers. What do your policies and procedures say and are you actively following them? How are your service providers protecting your data and their businesses?
  2. The SEC regulators are focusing on two areas:
  • Operation weaknesses, such as cybersecurity and compliance programs that are not customized to the adviser’s actual business.
  • Technical breaches, such as ADV inaccuracies and Form D violations. The SEC sees enforcement of these as promoting a fulsome culture of compliance.
  1. Have you examined your service provider contracts? Who is liable for losses from data breaches and hacks? Regulatory examinations typically require lists of service providers. We suggest preparing this list now and use it as an inventory of counterparties that need to be analyzed as part of your internal cybersecurity assessment. Additionally, we suggest preparing a list of questions to assess your service providers’ preparedness in case of a breach.
  2. Create a cybersecurity check list and provide a disclosure to your investors and clients so the protocol is clear should a breach occur.
  3. Institutional investors take operational due diligence seriously and incur significant time and expense performing due diligence.
  4. Assertions made by managers during the investment and operational due diligence phases are “remembered” and institutional investors will question or withdraw if managers contravene their previous assertions.
  5. Investment due diligence, in part, focuses on verifying previous trades and investments – be prepared to provide back-up information.
  6. When considering offshore jurisdictions, remember to consider what service providers are available in that location.
  7. The most common offshore jurisdictions have well developed and efficient regulatory and court systems.
  8. Operational and annual filing expenses can be significant, forecasting AUM growth for an offshore fund is an important planning step.

Look for information on the next Investment Insights event in early 2016.

Click here for more on Winstead's Investment Management and Private Funds Industry Group

People

  1. Andrew Rosell

Industries

We would like to thank our panelists for taking the time to go over key issues and hot topics in today's investment market:

Tim Ludford-Thomas – Partner at Walkers (Cayman Islands office) in the firm's Global Investment Funds Group

Patrick O’Connor – Senior Vice President and Chief Investment Officer for Cook Children’s HealthCare System

David Andrew – Founder and President of Autumn Lane Advisors, a multi-family investment office based in Houston

The discussion was moderated by Andrew Rosell – Shareholder and Chair of Winstead's Investment Management and Private Funds Industry Group

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