Alternative Credit Guest Articles https://alpha-week.com/ en New Partnerships Between Banks and Private Credit Lenders Deliver Opportunities for Businesses Across the Country https://alpha-week.com/new-partnerships-between-banks-and-private-credit-lenders-deliver-opportunities-businesses-across <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--title--features.html.twig x field--node--title.html.twig * field--node--features.html.twig * field--title.html.twig * field--string.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <span>New Partnerships Between Banks and Private Credit Lenders Deliver Opportunities for Businesses Across the Country</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-image--features.html.twig * field--node--field-image.html.twig * field--node--features.html.twig * field--field-image.html.twig * field--image.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-image field--type-image field--label-hidden field__item"> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_formatter' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_style' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-style.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image' --> <!-- BEGIN OUTPUT from 'core/modules/system/templates/image.html.twig' --> <img loading="lazy" src="https://www.alpha-week.com/sites/default/files/styles/article_full/public/2024-03/Direct-Lending-2.png?itok=KRQTtBZG" width="400" height="225" alt="Private Lenders" typeof="foaf:Image" /> <!-- END OUTPUT from 'core/modules/system/templates/image.html.twig' --> <!-- END OUTPUT from 'core/modules/image/templates/image-style.html.twig' --> <!-- END OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--created--features.html.twig x field--node--created.html.twig * field--node--features.html.twig * field--created.html.twig * field--created.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <span>Tue, 03/26/2024 - 10:05</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--body--features.html.twig * field--node--body.html.twig * field--node--features.html.twig * field--body.html.twig * field--text-with-summary.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p><span><span><span><span>The private credit industry has experienced unprecedented growth in recent years, helping hundreds of business owners as they scale their companies and navigate choppy waters.</span></span></span></span></p> <p><span><span><span><span>Since the late 1970s, loans from private credit lenders have served as a lifeline to small businesses nationwide, particularly those that cannot qualify for loans from traditional banks or need capital beyond what banks can provide.</span></span></span></span></p> <p><span><span><span><span>In the past decade, the private credit sector has witnessed an impressive surge in assets, increasing from </span></span><a href="https://www.investmentcouncil.org/wp-content/uploads/2023/10/EY-AIC-Private-credit-attributed-employment-report-09-28-2023-1.pdf"><span>$400 billion to $1 trillion</span></a><span><span>. This surge has altered the dynamic between banks and private credit lenders, prompting increased collaboration.</span></span></span></span></p> <p><span><span><span><span>In recent years, major Wall Street banks have ventured into the private credit market, with several launching direct lending operations to better serve their clientele.</span></span></span></span></p> <p><span><span><span><span>For example, both </span></span><a href="https://www.citigroup.com/global/news/press-release/2024/citi-and-luminarx-capital-announce-the-launch-of-strategic-private-lending-vehicle-cinergy"><span>Citigroup</span></a><span><span> and </span></span><a href="https://newsroom.wf.com/English/news-releases/news-release-details/2023/Centerbridge-Partners-and-Wells-Fargo-Enter-Strategic-Relationship-Focused-on-Direct-Lending-to-Middle-Market-Companies/default.aspx"><span>Wells Fargo</span></a><span><span> have rolled out separate private lending ventures, offering a range of new private credit solutions to their companies and clients. In </span></span><a href="https://www.privatedebtinvestor.com/citi-breaks-into-private-credit-with-luminarx-partnership/"><span>January</span></a><span><span>, Citigroup, in collaboration with alternative investment manager LuminArx Capital, introduced Cinergy, a private lending venture that invests across multiple asset classes and is backed by over $2 billion from LuminArx Capital. In </span></span><a href="https://www.reuters.com/business/finance/centerbridge-teams-up-with-wells-fargo-launch-direct-lending-fund-2023-09-26/"><span>September</span></a><span><span> of last year, Wells Fargo announced a partnership with private equity firm Centerbridge Partners to launch a fund exclusively dedicated to direct lending for midsize, family-owned, and private companies across North America.</span></span></span></span></p> <!-- THEME DEBUG --> <!-- THEME HOOK: 'filter_caption' --> <!-- BEGIN OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --> <figure role="group" class="align-right"> <!-- THEME DEBUG --> <!-- THEME HOOK: 'entity_embed_container' --> <!-- BEGIN OUTPUT from 'modules/contrib/entity_embed/templates/entity-embed-container.html.twig' --> <div alt="Drew Maloney" data-embed-button="entity_browser_button" data-entity-embed-display="image:image" data-entity-embed-display-settings="{&quot;image_style&quot;:&quot;&quot;,&quot;image_link&quot;:&quot;&quot;,&quot;image_loading&quot;:{&quot;attribute&quot;:&quot;lazy&quot;}}" data-entity-type="file" data-entity-uuid="e12e0a49-7864-4d8a-b803-df0f92e5fff7" data-langcode="en" title="Drew Maloney" class="embedded-entity"> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_formatter' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image' --> <!-- BEGIN OUTPUT from 'core/modules/system/templates/image.html.twig' --> <img loading="lazy" src="https://www.alpha-week.com/sites/default/files/inline-images/Drew-Maloney.jpeg" alt="Drew Maloney" title="Drew Maloney" typeof="foaf:Image" /><!-- END OUTPUT from 'core/modules/system/templates/image.html.twig' --><!-- END OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --></div> <!-- END OUTPUT from 'modules/contrib/entity_embed/templates/entity-embed-container.html.twig' --> <figcaption>Drew Maloney</figcaption></figure><!-- END OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --><p><span><span><span><span>Banks without distinct private lending ventures are also actively exploring opportunities in the market. </span></span><a href="https://www.reuters.com/business/finance/morgan-stanley-plans-double-private-credit-portfolio-50-bln-2024-01-26/"><span>Morgan Stanley</span></a><span><span> is looking to expand its private credit portfolio to $50 billion, having already invested over $300 million and secured $25 billion from prominent investors. </span></span><a href="https://www.reuters.com/business/finance/jpmorgan-begins-private-lending-drive-with-10-billion-source-2023-01-19/"><span>JPMorgan</span></a><span><span> has reportedly allocated at least $10 billion to fund an expansion into private credit.</span></span></span></span></p> <p><span><span><span><span>In these emerging partnerships, both banks and private credit firms bring unique strengths to the table. Private credit firms, offering flexible, bespoke, relationship-oriented deals, can tailor solutions to meet the specific needs of a variety of clientele. Banks, with their vast networks and resources, reach a large customer base, often acting as intermediaries in private credit deals by connecting borrowers with lenders. By partnering with private credit, banks can also diversify revenue sources beyond traditional banking activities, strengthen client relationships by offering tailored financing solutions, and gain a competitive edge by establishing themselves in this rapidly growing sector.</span></span></span></span></p> <p><span><span><span><span>A potentially </span></span><a href="https://www.wsj.com/finance/banking/bank-synthetic-risk-transfers-basel-endgame-62410f6c"><span>shifting regulatory environment</span></a><span><span> also makes private credit partnerships appealing to banks. With the introduction of new regulations, banks may be required to hold more money to cover loans with potentially higher risks. Through partnerships with private credit firms, banks and private credit investors can now share both the returns and risks of a loan. This mitigates their respective exposure to potential loss. This partnership allows banks to be more capital efficient by reducing the amount of money they need to set aside for loans while still being able to lend to their customers.</span></span></span></span></p> <p><span><span><span><span>Ultimately, businesses are the greatest beneficiaries of these partnerships. As banks venture into the private credit market, we’re on the verge of a shift in the direct lending landscape. If this trend continues, we'll enter a new era where more businesses can have access to critical capital, obtain tailored loans to fit their needs, and have greater opportunities to grow.</span></span></span></span></p> <p><span><span><span><span>**********</span></span></span></span></p> <p><em><strong>Drew Maloney</strong> is the President &amp; CEO of the <strong><a href="https://www.investmentcouncil.org/">American Investment Council</a></strong></em></p> <p>***</p> <p><em>The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group</em></p> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-tags--features.html.twig * field--node--field-tags.html.twig * field--node--features.html.twig * field--field-tags.html.twig * field--entity-reference.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div class="field__item"><a href="/alternative-credit-guest-articles" hreflang="en">Alternative Credit Guest Articles</a></div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <drupal-render-placeholder callback="flag.link_builder:build" arguments="0=node&amp;1=10758&amp;2=bookmark" token="gjg5K-lF4q1p_IYNeSJUehncIt8hG3rc3iWHRDIGlkM"></drupal-render-placeholder> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-author--features.html.twig * field--node--field-author.html.twig * field--node--features.html.twig x field--field-author.html.twig * field--entity-reference.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <a href="/author/drew-maloney" hreflang="en">Drew Maloney</a> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-content-role--features.html.twig * field--node--field-content-role.html.twig * field--node--features.html.twig * field--field-content-role.html.twig * field--list-string.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-content-role field--type-list-string field--label-above"> <div class="field__label">Content role</div> <div class="field__item">Public</div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> Tue, 26 Mar 2024 10:05:09 +0000 AlphaWeek Staff 10758 at https://alpha-week.com Anti-Greenwashing in the Spotlight: UK Firms Gearing Up for New Rules and Guidance https://alpha-week.com/anti-greenwashing-spotlight-uk-firms-gearing-new-rules-and-guidance <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--title--features.html.twig x field--node--title.html.twig * field--node--features.html.twig * field--title.html.twig * field--string.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <span>Anti-Greenwashing in the Spotlight: UK Firms Gearing Up for New Rules and Guidance</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-image--features.html.twig * field--node--field-image.html.twig * field--node--features.html.twig * field--field-image.html.twig * field--image.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-image field--type-image field--label-hidden field__item"> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_formatter' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_style' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-style.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image' --> <!-- BEGIN OUTPUT from 'core/modules/system/templates/image.html.twig' --> <img loading="lazy" src="https://www.alpha-week.com/sites/default/files/styles/article_full/public/2024-03/ESG-2.png?itok=khRyoGQE" width="400" height="225" alt="ESG" typeof="foaf:Image" /> <!-- END OUTPUT from 'core/modules/system/templates/image.html.twig' --> <!-- END OUTPUT from 'core/modules/image/templates/image-style.html.twig' --> <!-- END OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--created--features.html.twig x field--node--created.html.twig * field--node--features.html.twig * field--created.html.twig * field--created.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <span>Mon, 03/25/2024 - 11:38</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--body--features.html.twig * field--node--body.html.twig * field--node--features.html.twig * field--body.html.twig * field--text-with-summary.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p><span><span><span><span><span>The UK’s Financial Conduct Authority (the <strong>FCA</strong>) has become increasingly concerned in recent years that some financial services firms are making sustainability-related claims which are exaggerated, misleading or unsubstantiated. Tackling 'greenwashing’ is therefore high on the regulatory agenda, and an area of focus for the FCA.  </span></span></span></span></span></p> <p><span><span><span><span><span>As part of this, the FCA has introduced a new ‘anti-greenwashing rule’, which is due to come into force on 31 May 2024. UK regulated firms will need to ensure that sustainability-related claims made by firms are clear, fair, and not misleading and are consistent with the sustainability characteristics of the product or service. </span></span></span></span></span></p> <p><span><span><span><span><span>The purpose of this new rule is to allow consumers to make informed decisions aligned with their sustainability preferences. The FCA also wants to create a ‘level playing field’ for firms with products which do represent a more sustainable choice and who make genuine claims about their products’ sustainability characteristics. </span></span></span></span></span></p> <p><span><span><span><span><span>The new anti-greenwashing rule is consistent with the FCA’s broader regulatory drive to improve the clarity and accuracy of firms’ marketing and communication. It dovetails with the FCA’s Consumer Duty, which came into force last year. This Duty places an obligation on UK regulated firms to act in good faith towards consumers and ensure that consumers are provided with information that enables them to make informed decisions.</span></span></span></span></span></p> <!-- THEME DEBUG --> <!-- THEME HOOK: 'filter_caption' --> <!-- BEGIN OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --> <figure role="group" class="align-right"><img alt="Jessica Reed" data-entity-type="file" data-entity-uuid="30612fb4-4b14-4958-ab4a-03369fed7cdb" src="https://www.alpha-week.com/sites/default/files/inline-images/Jessica-Reed.jpg" width="200" height="200" loading="lazy" /><figcaption>Jessica Reed</figcaption></figure><!-- END OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --><p><span><span><span><span><span>UK firms are also subject to separate rules on greenwashing enforced by the Advertising Standards Authority (the ASA) and the Consumer and Markets Authority (the CMA), who have both already published guidance relating to sustainability claims.</span></span></span></span></span></p> <p><strong><span><span><span><span><span>Which firms does the anti-greenwashing rule apply to, and what does it require? </span></span></span></span></span></strong></p> <p><span><span><span><span><span>The anti-greenwashing rule applies to all firms regulated by the FCA – no matter what their regulatory permissions or who their clients are.</span></span></span></span></span></p> <p><span><span><span><span><span>These firms must ensure that any references they make to the sustainability characteristics of their financial products and services are consistent with the sustainability characteristics of the product or service and are clear, fair, and not misleading.</span></span></span></span></span></p> <p><span><span><span><span><span>“Sustainability characteristics” relate to the environmental and / or social aspects of financial products and services. For example, a pension provider may refer to a pension fund as being “socially responsible”. Or a bank may refer to a mortgage as being “green”. </span></span></span></span></span></p> <p><span><span><span><span><span>From 31 May, the FCA expects any sustainability references in communications to be:</span></span></span></span></span></p> <ul><li><span><span><span><span><span>Correct and capable of being substantiated through evidence.</span></span></span></span></span></li> <li><span><span><span><span><span>Clear and presented in a way that can be understood.</span></span></span></span></span></li> <li><span><span><span><span><span>Complete – they should not omit key information and should take into account the life-cycle of the product or service.</span></span></span></span></span></li> <li><span><span><span><span><span>Fair and meaningful in relation to any comparisons to other products or services.</span></span></span></span></span></li> </ul><p><span><span><span><span><span>The scope of the rule is not limited to retail business. Products and services that are marketed only to professionals, including institutional investors, are caught by the new requirements. For example, UK authorised firms marketing a private fund in the UK to institutional investors would need to ensure that any private placement memorandum or information memorandum complies with the anti-greenwashing rule.</span></span></span></span></span></p> <p><span><span><span><span><strong><span>What guidance is available to help firms comply with the new rule? </span></strong></span></span></span></span></p> <p><span><span><span><span><span>The FCA has published draft guidance (</span><span><a href="https://www.fca.org.uk/publication/guidance-consultation/gc23-3.pdf">GC23/3</a></span><span>) to help UK regulated firms to understand the FCA’s expectations under the anti-greenwashing rule. This is due to come into force on the same day as the anti-greenwashing rule. However, simply applying the guidance will not provide a ‘safe harbour’. Firms need to consider carefully how the rules apply to their business and communications in order to ensure compliance.</span></span></span></span></span></p> <p><span><span><span><span><span>The guidance highlights that firms need to think hard about instances whereby the combination of wording and images of communications could give a misleading impression of sustainability characteristics. For example, firms should be wary of listing financial products next to “green” imagery (for example, a picture of a rainforest) when only one of the products has sustainability characteristics. Here, the imagery might misleadingly suggest that all the products are “green”. </span></span></span></span></span></p> <p><span><span><span><span><span>Firms need to take care with comparisons and ensure that they are “fair and meaningful”. Any claims should therefore make clear what is being compared, how a comparison is being made and should compare like with like. An example the FCA gives is that where a firm makes a claim that a car insurance product is the “greenest car insurance on the market” information must be provided to back up this claim and the communication should make clear how this conclusion was reached and what comparisons the claim is based upon.</span></span></span></span></span></p> <!-- THEME DEBUG --> <!-- THEME HOOK: 'filter_caption' --> <!-- BEGIN OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --> <figure role="group" class="align-right"><img alt="Edward Twigger" data-entity-type="file" data-entity-uuid="b581acc5-e934-4eaf-aa12-693ba72cbc40" src="https://www.alpha-week.com/sites/default/files/inline-images/Edward-Twigger_0.jpg" width="200" height="200" loading="lazy" /><figcaption>Edward Twigger</figcaption></figure><!-- END OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --><p><span><span><span><span><span>Firms must also ensure that they avoid claims that might be theoretically true but be misleading. For instance, if the proceeds of a bond are used to finance sustainability projects, it may be described as a “green bond”. However, where that bond’s proceeds are invested into making fossil fuel production more energy efficient, the FCA would not expect this to be marketed as a “green bond” as this would be contrary to investor expectations.</span></span></span></span></span></p> <p><span><span><strong><span>How are other UK regulators tackling greenwashing? </span></strong></span></span></p> <p><span><span><span><span><span>In 2021, the CMA published guidance for firms making environmental claims on goods and services. The CMA is able to take action against financial services firms for misleading claims under consumer protection legislation, although it would normally leave this to the FCA. Similarly, the ASA is also able to enforce the Committee of Advertising Practice’s (CAP) Code against firms making misleading advertising claims.</span></span></span></span></span></p> <p><span><span><span><span>In 2022, the ASA banned two HSBC adverts which had appeared on bus stops. The ASA said that HSBC must “<a href="https://www.asa.org.uk/rulings/hsbc-uk-bank-plc-g21-1127656-hsbc-uk-bank-plc.html">ensure that future marketing communications with environmental claims were adequately qualified and did not omit material information about its own contribution to carbon dioxide and greenhouse gas emissions</a>.”</span></span></span></span></p> <p><span><span><span><span><strong><span>What should firms be doing now?</span></strong></span></span></span></span></p> <p><span><span><span><span><span>UK authorised firms must review all their existing customer communications (whether marketing or not) to establish whether they are making any kind of sustainability claims. Firms should then take a hard look at how any sustainability claims may withstand scrutiny under the new rules and guidance. Is there evidence to back up the claims, and is it readily available? Clear coordination between firms’ sales, marketing, operations, legal and compliance will be key to achieving compliant communications.</span></span></span></span></span></p> <p><span><span><span><span><span>Linked to this, firms should review and strengthen their internal review processes for communications to cater for the anti-greenwashing rule. Communications should always pass through multiple lines of review, and firms may wish to consider whether additional checks may be carried out to avoid inadvertently breaching this new rule. Each firm’s relevant internal teams will need to work closely together to design and enhance internal processes for the approval of any communications and coordinate their messaging across different platforms and media.</span></span></span></span></span></p> <p><span><span><span><span><span>Firms might want to consider some consumer behavioural testing to assess whether communications could be considered by consumers to be misleading. This is something the FCA has already promoted as part of the Consumer Duty. </span></span></span></span></span></p> <p><span><span><span><span><span>The FCA has also reminded firms to check their sustainability-related claims regularly, as the underlying evidence could change. </span></span></span></span></span></p> <p><span><span><span><span><span>Once the anti-greenwashing rule is in force, we expect the FCA to monitor for signs of greenwashing from a range of sources. As well as monitoring firms’ financial promotions, the FCA will also monitor client complaints, intelligence gathered on the quality of firms’ regulatory applications, and broader supervisory intelligence.</span></span></span></span></span></p> <p><span><span><span><span><span>**********</span></span></span></span></span></p> <p><em><span><span><strong>Jessica Reed</strong> is<span> a Partner and </span><strong>Edward Twigger</strong><span> is an Associate at <strong><a href="https://www.farrer.co.uk/">Farrer &amp; Co</a></strong></span></span></span></em></p> <p><em>***</em></p> <p><em>The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group</em></p></div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-tags--features.html.twig * field--node--field-tags.html.twig * 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<drupal-render-placeholder callback="flag.link_builder:build" arguments="0=node&amp;1=10754&amp;2=bookmark" token="7nLFTZRA0U3myVqoiH_tKPTZ_idb9UOrsP3wKNhvHW4"></drupal-render-placeholder> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-author--features.html.twig * field--node--field-author.html.twig * field--node--features.html.twig x field--field-author.html.twig * field--entity-reference.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <a href="/author/jessica-reed-edward-twigger" hreflang="en">Jessica Reed | Edward Twigger</a> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-content-role--features.html.twig * field--node--field-content-role.html.twig * field--node--features.html.twig * field--field-content-role.html.twig * field--list-string.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-content-role field--type-list-string field--label-above"> <div class="field__label">Content role</div> <div class="field__item">Public</div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> Mon, 25 Mar 2024 11:38:54 +0000 AlphaWeek Staff 10754 at https://alpha-week.com Assessing the Potential of AI in Fund Services https://alpha-week.com/assessing-potential-ai-fund-services <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--title--features.html.twig x field--node--title.html.twig * field--node--features.html.twig * field--title.html.twig * field--string.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <span>Assessing the Potential of AI in Fund Services</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-image--features.html.twig * field--node--field-image.html.twig * field--node--features.html.twig * field--field-image.html.twig * field--image.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-image field--type-image field--label-hidden field__item"> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_formatter' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_style' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-style.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image' --> <!-- BEGIN OUTPUT from 'core/modules/system/templates/image.html.twig' --> <img loading="lazy" src="https://www.alpha-week.com/sites/default/files/styles/article_full/public/2024-03/AI-Fund-Services.jpg?itok=4b_7HH55" width="400" height="225" alt="Artificial Intelligence" typeof="foaf:Image" /> <!-- END OUTPUT from 'core/modules/system/templates/image.html.twig' --> <!-- END OUTPUT from 'core/modules/image/templates/image-style.html.twig' --> <!-- END OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--created--features.html.twig x field--node--created.html.twig * field--node--features.html.twig * field--created.html.twig * field--created.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <span>Mon, 03/18/2024 - 12:53</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--body--features.html.twig * field--node--body.html.twig * field--node--features.html.twig * field--body.html.twig * field--text-with-summary.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p><span><span><span><span><span><span>Artificial Intelligence (AI) is transforming the financial services industry and providing new opportunities in the way investors and fund managers do business.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>From back-office automation and enhanced decision making to managing risk and portfolio optimisation, fund service providers are increasingly looking at the potential for sophisticated AI tools to help maximise returns and achieve investor goals.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>While the development and implementation of AI within fund administration is still in its early stages, it will undoubtedly become an indispensable tool. Despite its enormous potential, however, AI, needs to be deployed properly and used correctly, with a rigorous framework of checks and balances.</span></span></span></span></span></span></p> <p><span><span><span><strong><span><span><span>How is AI shaping fund services?</span></span></span></strong></span></span></span></p> <p><span><span><span><span><span><span>AI is a broad field concerned with the development of systems that can imitate human intelligence and problem-solving skills. Machine learning, a subset of AI, can access and process mass datasets to build an understanding of past behaviours in order to improve future outcome, while generative AI can be used to create new content including text imagery and audio.</span></span></span></span></span></span></p> <!-- THEME DEBUG --> <!-- THEME HOOK: 'filter_caption' --> <!-- BEGIN OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --> <figure role="group" class="align-right"> <!-- THEME DEBUG --> <!-- THEME HOOK: 'entity_embed_container' --> <!-- BEGIN OUTPUT from 'modules/contrib/entity_embed/templates/entity-embed-container.html.twig' --> <div alt="Chris Day" data-embed-button="entity_browser_button" data-entity-embed-display="image:image" data-entity-embed-display-settings="{&quot;image_style&quot;:&quot;&quot;,&quot;image_link&quot;:&quot;&quot;,&quot;image_loading&quot;:{&quot;attribute&quot;:&quot;lazy&quot;}}" data-entity-type="file" data-entity-uuid="bde2f65a-728b-4e0d-807a-55ceb6871b6f" data-langcode="en" title="Chris Day" class="embedded-entity"> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_formatter' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image' --> <!-- BEGIN OUTPUT from 'core/modules/system/templates/image.html.twig' --> <img loading="lazy" src="https://www.alpha-week.com/sites/default/files/inline-images/Chris-Day.jpg" alt="Chris Day" title="Chris Day" typeof="foaf:Image" /><!-- END OUTPUT from 'core/modules/system/templates/image.html.twig' --><!-- END OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --></div> <!-- END OUTPUT from 'modules/contrib/entity_embed/templates/entity-embed-container.html.twig' --> <figcaption>Chris Day</figcaption></figure><!-- END OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --><p><span><span><span><span><span><span>Despite the recent increase of public interest, AI is not a new concept. The idea of a machine functioning on its own is ancient, however it wasn’t until the 1950s and the publication of Alan Turing’s work “Computer Machinery and Intelligence” that the birth of AI occurred. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Recent developments in AI are being applied within sectors that benefit from the automation of repetitive tasks usually carried out by humans. The theoretical benefits of this automation include a decrease in the risk of human error in data input, cost reduction, and increased productivity. Overall, businesses can gain greater efficiencies through the use of AI.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>In the financial sector, AI’s ability to mine big data is changing the way that service providers operate. AI’s ability to work quickly on huge volumes of information can allow services providers to tackle workload backlogs, completing tasks which provide low added value. This allows professionals to focus on more subjective tasks which provide higher added value. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>AI can also be used to improve fraud detection, assess and decrease risks and can be used for compliance.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Generative AI, such as ChatGPT, has become a day-to-day companion in the professional lives of many. Its development has accelerated with the rise of other leading platforms such as CoPilot and Gemini. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>An increasing number of companies have developed their own generative AI tools to improve employee productivity and personal development. One common use case is providing employees with access to a secured AI powered assistant that can provide answers to almost all work-related questions, while using the best practices for keeping a company's sensitive data safe.</span></span></span></span></span></span></p> <p><span><span><span><strong><span><span><span>What is the potential of AI in fund services?</span></span></span></strong></span></span></span></p> <p><span><span><span><span><span><span>Asset management companies can use AI for their portfolio and risk management, using it to take a closer look at clients' portfolios. The high level of predictive analysis AI offers through the forecast of market trends, identifying trading opportunities and risk management can lead to higher returns with decreased risk. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>AI might also be valuable tool for Transfer Agents (TA), where many processes are data entry-heavy, especially the investor onboarding process. In addition, screening for hits and continuous checking of Anti-Money Laundering (AML) and Know Your Client (KYC) processes could benefit from the speed and scale of AI and its attention to detail and monitoring capabilities. Humans can intervene and decide, based on the outcome, whether additional manual action is required.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>As technology continues to develop, we expect to see AI managing more fund administration tasks including client and investor queries, generating and delivering regular performance data and analysis, directly automating and submitting regulatory reporting, and the use of voice to text AI assistance for taking minutes of meetings and summarising key takeaways.</span></span></span></span></span></span></p> <p><span><span><span><strong><span><span><span>Combining AI with the human touch</span></span></span></strong></span></span></span></p> <p><span><span><span><span><span><span>The expectation is that AI will enhance efficiency and productivity by undertaking more routine work and assisting with tasks like research. </span></span></span></span></span></span></p> <!-- THEME DEBUG --> <!-- THEME HOOK: 'filter_caption' --> <!-- BEGIN OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --> <figure role="group" class="align-right"><img alt="Inesa Pistolas" data-entity-type="file" data-entity-uuid="14d8c511-3495-44d2-ad5d-37333d7545d5" src="https://www.alpha-week.com/sites/default/files/inline-images/Inesa-Pistolas.jpg" width="200" height="200" loading="lazy" /><figcaption>Inesa Pistolas</figcaption></figure><!-- END OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --><p><span><span><span><span><span><span>This will free up fund administration teams to focus on the more complex work higher up the value chain. It will also give professionals more time to focus on human endeavours like developing relationships and client interaction; by their very nature these can't be replicated or replaced by AI. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>It is important that the industry continues to undertake research and development, to assess how it can maximise the benefits of AI. In the fund administration space, the anticipation is that AI will become supplementary to, rather than replace, the skills of a fund admin team. If anything, AI has the potential to free-up teams, allowing them to be even more client focused than they already are.   </span></span></span></span></span></span></p> <p><span><span><span><strong><span><span><span>What are the pitfalls of AI?</span></span></span></strong></span></span></span></p> <p><span><span><span><span><span><span>Of course, AI does not only bear gifts; it also brings threats and challenges. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Firstly, there are data privacy and security risks. Since large amounts of sensitive financial data are handled by AI there is an increased risk of data breach incidents. Therefore, increased cybersecurity measures and enhanced data protection regulations are required.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Further, AI algorithms lack human intuition and subjective judgment. AI lacks emotional intelligence, which is crucial to building trust with clients.  Focusing too much on AI and its outcomes might cause the handler to overlook unique situations in the market and unanticipated events, which do not follow predetermined patterns. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Currently, these instances can only be prevented by human intervention. AI systems also need to be updated and to be compliant with new regulation criteria every time a regulation changes. </span></span></span></span></span></span></p> <p><span><span><span><strong><span><span><span>The future of funds and AI</span></span></span></strong></span></span></span></p> <p><span><span><span><span><span><span>AI is here to stay and change our lives – and the funds sector - immeasurably. However, it will not fully replace humans, as many fear or suggest. The most likely scenario is a hybrid approach, a symbiotic relationship between automation systems and humans where each party will complement the strength and weaknesses of the other. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>By handling repetitive tasks, AI allows humans to focus more on complex tasks that require critical thinking and decision making. The more developed AI becomes, the deeper this relationship will be. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>The way we decide to manage, use and live with it will shape our future in business and in life.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>**********</span></span></span></span></span></span></p> <p><em><strong><span><span><span>Chris Day</span></span></span></strong><span><span><span> is Global Head of Fund administration and </span></span></span><strong><span><span><span>Inesa Pistolas</span></span></span></strong><span><span><span> is Head of Operations, Fund Administration, Luxembourg at </span></span></span><a href="https://www.ogier.com/"><strong><span><span><span>Ogier Global</span></span></span></strong></a></em></p> <p><em><span><span><span>***</span></span></span></em></p> <p><em>The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group</em></p> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-tags--features.html.twig * field--node--field-tags.html.twig * field--node--features.html.twig * field--field-tags.html.twig * field--entity-reference.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div class="field__item"><a href="/alternative-credit-guest-articles" hreflang="en">Alternative Credit Guest Articles</a></div> <div class="field__item"><a href="/hedge-funds-guest-articles" hreflang="en">Hedge Funds Guest Articles</a></div> <div class="field__item"><a href="/private-equity-guest-articles" hreflang="en">Private Equity Guest Articles</a></div> <div class="field__item"><a href="/real-assets-guest-articles" hreflang="en">Real Assets Guest Articles</a></div> <div class="field__item"><a href="/venture-capital-guest-articles" hreflang="en">Venture Capital Guest Articles</a></div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <drupal-render-placeholder callback="flag.link_builder:build" arguments="0=node&amp;1=10741&amp;2=bookmark" token="ALNbe-_b--mQZLElLf_Ogrmm9N0wxEJyDY3uVoSTfpE"></drupal-render-placeholder> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-author--features.html.twig * field--node--field-author.html.twig * field--node--features.html.twig x field--field-author.html.twig * field--entity-reference.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <a href="/author/chris-day-inesa-pistolas" hreflang="en">Chris Day | Inesa Pistolas</a> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-content-role--features.html.twig * field--node--field-content-role.html.twig * field--node--features.html.twig * field--field-content-role.html.twig * field--list-string.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-content-role field--type-list-string field--label-above"> <div class="field__label">Content role</div> <div class="field__item">Public</div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> Mon, 18 Mar 2024 12:53:22 +0000 AlphaWeek Staff 10741 at https://alpha-week.com The Price is Right? The Impact of a Challenging Environment on Pricing and Valuations https://alpha-week.com/price-right-impact-challenging-environment-pricing-and-valuations <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--title--features.html.twig x field--node--title.html.twig * field--node--features.html.twig * field--title.html.twig * field--string.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <span>The Price is Right? The Impact of a Challenging Environment on Pricing and Valuations</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-image--features.html.twig * field--node--field-image.html.twig * field--node--features.html.twig * field--field-image.html.twig * field--image.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-image field--type-image field--label-hidden field__item"> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_formatter' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_style' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-style.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image' --> <!-- BEGIN OUTPUT from 'core/modules/system/templates/image.html.twig' --> <img loading="lazy" src="https://www.alpha-week.com/sites/default/files/styles/article_full/public/2024-02/Valuation.jpeg?itok=a_amL0VT" width="400" height="225" alt="Valuation" typeof="foaf:Image" /> <!-- END OUTPUT from 'core/modules/system/templates/image.html.twig' --> <!-- END OUTPUT from 'core/modules/image/templates/image-style.html.twig' --> <!-- END OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--created--features.html.twig x field--node--created.html.twig * field--node--features.html.twig * field--created.html.twig * field--created.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <span>Mon, 02/05/2024 - 12:33</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--body--features.html.twig * field--node--body.html.twig * field--node--features.html.twig * field--body.html.twig * field--text-with-summary.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p><span><span><span><span><span><span>Last year presented a number of hurdles for managers in the private capital markets, with many thinking 2024 couldn’t come quickly enough.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>An uncertain geopolitical backdrop combined with rising interest rates and a tougher exit environment all resulted in a degree of caution that widened the gap between what buyers were willing to pay and sellers were willing to accept.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>But as we move into the second month of a new year and with interest rates at least for now appearing stable, there is hope for a stronger year ahead.</span></span></span></span></span></span></p> <p><span><span><span><strong><span><span><span>Notes on a challenging year</span></span></span></strong></span></span></span></p> <p><span><span><span><span><span><span>There’s no doubt that the past 12 months have been tough for the alternative investment fund sector as a whole. Recent statistics issued by Preqin highlighted that in 2023 only 874 private equity funds closed, compared to in excess of 1,400 annually in previous years. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Meanwhile aggregate capital raised by real estate funds globally fell by 19% year on year to $107.7bn in Q1–Q3 2023, compared with a 17% drop between 2021 and 2022 (<a href="https://go.preqin.com/e/909852/lobal-reports-2024-real-estate/c441qs/898719182/h/mrekhBI0TbMoz9VCtDZ3Qo0E6X8RnoVt66ULcBpE3-A"><span><span>Preqin 2024 Global Report: Real Estate</span></span></a>). </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>In addition, funds have taken longer to raise; in North America, the proportion closing after more than 24 months leapt from 31% in 2022 to 57% in 2023.​​​​​​</span></span></span></span></span></span></p> <!-- THEME DEBUG --> <!-- THEME HOOK: 'filter_caption' --> <!-- BEGIN OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --> <figure role="group" class="align-right"><img alt="Ashley Vardon" data-entity-type="file" data-entity-uuid="712bf49a-5820-4492-8225-a30991e9e53e" src="https://www.alpha-week.com/sites/default/files/inline-images/Ashley-Vardon.jpg" width="200" height="200" loading="lazy" /><figcaption>Ashley Vardon</figcaption></figure><!-- END OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --><p><span><span><span><span><span><span>And, while fundraising in the private capital space globally more or less matched that of 2022, it was predominately the larger established funds driving these figures - a trend mirrored in the public markets where the bigger players, such as the ‘Magnificent Seven’, were attracting the majority of capital available in the sector.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Unsurprisingly, the resulting depletion in deal flow activity had a knock-on effect for the fund-raising attempts of existing managers with the delays in returning the capital on established investments impacting managers’ ability to set off on their next fund venture.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>All in, this has led to an uncertain picture, especially when it comes to valuations.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Consequently, a cavern has opened up between the prices buyers and sellers are prepared to agree upon with many managers choosing to hold on to key assets rather than sell for what they perceive to be an under-valued price.</span></span></span></span></span></span></p> <p><span><span><span><strong><span><span><span>Interest rates</span></span></span></strong></span></span></span></p> <p><span><span><span><span><span><span>Where deals could be agreed and pricing aligned, higher levels of interest rates contributed to increased costs of debt, leading managers to scale back on leveraged buyout activity and look for more creative ways to fund and get deals over the line. And, in the fight for liquidity in an illiquid market, managers in the secondary and more opportunistic space were still actively looking to get deals done while facing the same challenges on pricing. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Interest rates - for now at least - look likely to remain stable with a very real prospect of falling as we move through 2024.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>As a result, some common ground on pricing will hopefully be reached to kick start much-needed deal flow activity and astute fund managers cognisant of the opportunities will no doubt be looking to pick up investments at favourable pricing, particularly from sellers looking for liquidity. </span></span></span></span></span></span></p> <p><span><span><span><strong><span><span><span>Year ahead</span></span></span></strong></span></span></span></p> <p><span><span><span><span><span><span>Despite events of the last year, there is still much to be positive about for 2024. According to S&amp;P Global Market Intelligence and Preqin data, there was an unprecedented $2.59trn of dry powder in the global private equity pot – an 8% rise on the previous year. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>This has the potential to be significant; appetite to utilise this capital to leverage deals later in the year buoyed by stable – or falling interest rates – could provide the boost needed to get deals across the line.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>But, while some of the larger players still achieved successful fund raising in 2023, for the vast majority, a degree of cost rationalisation and revision of their operating model for the future was necessary.  </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Consequently, from a professional services perspective, it will continue to be imperative to support managers in navigating that process as well as having the innovative mindset capable of providing the solutions to operational and structural pinch points.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Of course, a decrease in valuations would naturally provide some much-needed momentum and, when combined with greater certainty on interest rates underpinning better alignment between buyers and sellers, should prompt a return to form on deal flows.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>**********</span></span></span></span></span></span></p> <p><em><span><span><span><span><span><span><strong>Ashley Vardon</strong> is Senior Director - Fund Services at <strong><a href="https://www.jtcgroup.com/">JTC</a></strong></span></span></span></span></span></span></em></p> <p><em><span><span><span><span><span><span>***</span></span></span></span></span></span></em></p> <p><em><span><span><span><span><span><span>The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group</span></span></span></span></span></span></em></p> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-tags--features.html.twig * field--node--field-tags.html.twig * field--node--features.html.twig * field--field-tags.html.twig * field--entity-reference.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div class="field__item"><a href="/alternative-credit-guest-articles" hreflang="en">Alternative Credit Guest Articles</a></div> <div class="field__item"><a href="/private-equity-guest-articles" hreflang="en">Private Equity Guest Articles</a></div> <div class="field__item"><a href="/real-assets-guest-articles" hreflang="en">Real Assets Guest Articles</a></div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <drupal-render-placeholder callback="flag.link_builder:build" arguments="0=node&amp;1=10632&amp;2=bookmark" token="7D5WN5-txklByK_7KoHkQe3DpJ5V5dgDvuf7xQtsidM"></drupal-render-placeholder> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-author--features.html.twig * field--node--field-author.html.twig * field--node--features.html.twig x field--field-author.html.twig * field--entity-reference.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <a href="/author/ashley-vardon" hreflang="en">Ashley Vardon</a> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-content-role--features.html.twig * field--node--field-content-role.html.twig * field--node--features.html.twig * field--field-content-role.html.twig * field--list-string.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-content-role field--type-list-string field--label-above"> <div class="field__label">Content role</div> <div class="field__item">Public</div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> Mon, 05 Feb 2024 12:33:30 +0000 AlphaWeek Staff 10632 at https://alpha-week.com Turning Tax Compliance Data Into Actionable Decision-Support Information https://alpha-week.com/turning-tax-compliance-data-actionable-decision-support-information <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--title--features.html.twig x field--node--title.html.twig * field--node--features.html.twig * field--title.html.twig * field--string.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <span>Turning Tax Compliance Data Into Actionable Decision-Support Information</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--created--features.html.twig x field--node--created.html.twig * field--node--features.html.twig * field--created.html.twig * field--created.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <span>Wed, 12/13/2023 - 15:47</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--body--features.html.twig * field--node--body.html.twig * field--node--features.html.twig * field--body.html.twig * field--text-with-summary.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p><span><span><span>Congratulations to all of you Tax Directors and Operations Teams of Hedge and Private Equity Fund Managers (particularly those managing Funds-of-Funds) and Private Wealth Family Offices who have successfully navigated another Tax Second Season!  </span></span></span></p> <p><span><span><span>Now that you have recuperated from all the late nights and your blood pressure (and adrenaline rush and stress levels) have reduced to that of mere mortals, those of you who read my earlier article – <a href="https://www.alpha-week.com/making-good-use-calm-after-storm-tax-season">Making Good Use of the Calm After the Storm of Tax Season</a> – may be conducting (or considering conducting) a post-mortem to either informally reflect on – or more formally conduct an Operations Assessment to review – which processes worked well and which deserve a fresh look.</span></span></span></p> <p><span><span><span>Today, let me pose the following questions to you, often critical to the retrospective look at the just-ended tax season:</span></span></span></p> <ol><li><span><span><span>How many times in the last year have you received a urgent request from someone in your organization asking to identify the holdings whose sale would have the least (or most favorable) impact on taxable income? </span></span></span></li> <li><span><span><span>How accessible (both in terms of time and flexibility in reviewing) are your tax compliance data?</span></span></span></li> </ol><p><span><span><span>When these questions are posed to Tax Directors and Operations Teams, more often than not the response to the first question begins with a shudder as they recollect the frantic race to obtain that information – often involving having to reach out to their accounting firm to study and revert back with the best options – as the requestor paces back and forth in front of their desk.</span></span></span></p> <p><span><span><span>The answer to the second question often describes why obtaining those data results in such a frantic fire drill: the necessary data – and the ability to process those data – often resides with the fund administrator and/or tax accounting firm that manages your tax compliance data for you.</span></span></span></p> <p><span><span><span>Which brings us to what should be part of any fund manager’s Bill of Rights – and core to any Operations Assessment (or as one of my closest friends prefers as more descriptive: an Optimization Audit):</span></span></span></p> <ol><li><span><span><span>Your Tax Compliance data can (and should!) be leveraged for more than simply filing tax returns</span></span></span></li> <li><span><span><span>Your process should deliver the ability to transform those tax compliance <em>data</em> into actionable decision-support <em>information </em>on demand and without delay</span></span></span></li> </ol><p><span><span><span>The good news is that there are a host of newer software solutions that offer some flavor of this functionality, some from commercial vendors and others internally developed by accounting firms and tax departments in fund administrators, offering two ways to avail yourselves of their benefits:</span></span></span></p> <ol><li><span><span><span>License one of the commercial software products, with the recognition that its implementation will require integration with other components, internal or outsourced, of your tax compliance process, particularly the sources of data that will feed into this software; or</span></span></span></li> <li><span><span><span>Some accounting firms and tax departments in fund administrators offer similar software. Your due diligence prior to taking this option must include demonstrating that your tax and/or operations team has direct access to this software as well as access to support from your service provider as required.</span></span></span></li> </ol><p><span><span><span>Regardless of which option you select, evaluate the software to confirm that it offers the flexibility to deliver the analysis and reporting you require to obtain the necessary information from which to base your decisions; for example, spanning investment types, entities, etc. and incorporating the types of analysis (long- vs. short-term holdings, wash sales, constructive sales, etc.) that may apply to your investments.</span></span></span></p> <p><span><span><span>This discussion has focused on only one of the potential pain points experienced when delivering the processes performed by your Operations and Tax teams: Delays in responding to inquiries received from a portfolio manager or trader regarding the tax impact from trades under consideration, especially when liquidity requirements are time-sensitive.</span></span></span></p> <p><span><span><span>The rationale for the topic is that, often, firms accept this problem as an irritating cost of doing business rather than a solvable problem. Hopefully, this article illustrates that it is indeed solvable – and may be one of a number of issues, both reactive (pain points) and proactive (planning/updates to address future goals and targets) worthy of your review while those issues remain fresh in your mind.</span></span></span></p> <p><span><span><span>We hope that this abstract has shone a spotlight on one key, but often overlooked, pain point worthy of review by firms contemplating an Operations Assessment to review their just-ended tax season operations, whether performed internally or by engaging a consultant.</span></span></span></p> <p><span><span><span>**********</span></span></span></p> <p><span><span><span><strong>Gary A. Mills</strong> is the Founder/Consultant, <a href="https://www.linkedin.com/in/garymills1/">Gary Mills Consulting LLC</a> </span></span></span></p> <p><span><span><span>***</span></span></span></p> <p><em>The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group</em></p> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-tags--features.html.twig * field--node--field-tags.html.twig * field--node--features.html.twig * field--field-tags.html.twig * field--entity-reference.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div class="field__item"><a href="/alternative-credit-guest-articles" hreflang="en">Alternative Credit Guest Articles</a></div> <div class="field__item"><a href="/hedge-funds-guest-articles" hreflang="en">Hedge Funds Guest Articles</a></div> <div class="field__item"><a href="/private-equity-guest-articles" hreflang="en">Private Equity Guest Articles</a></div> <div class="field__item"><a href="/real-assets-guest-articles" hreflang="en">Real Assets Guest Articles</a></div> <div class="field__item"><a href="/venture-capital-guest-articles" hreflang="en">Venture Capital Guest Articles</a></div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <drupal-render-placeholder callback="flag.link_builder:build" arguments="0=node&amp;1=10575&amp;2=bookmark" token="K_PVMayuBXB5yz0Ywjazx_XOVtTtk_ttnBE_2-h3pto"></drupal-render-placeholder> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-author--features.html.twig * field--node--field-author.html.twig * field--node--features.html.twig x field--field-author.html.twig * field--entity-reference.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <a href="/author/gary-mills" hreflang="en">Gary A. Mills</a> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-content-role--features.html.twig * field--node--field-content-role.html.twig * field--node--features.html.twig * field--field-content-role.html.twig * field--list-string.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-content-role field--type-list-string field--label-above"> <div class="field__label">Content role</div> <div class="field__item">Public</div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> Wed, 13 Dec 2023 15:47:02 +0000 AlphaWeek Staff 10575 at https://alpha-week.com EU Proposes Root and Branch Review of Its Flagship Sustainable Finance Disclosure Regulation https://alpha-week.com/eu-proposes-root-and-branch-review-its-flagship-sustainable-finance-disclosure-regulation <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--title--features.html.twig x field--node--title.html.twig * field--node--features.html.twig * field--title.html.twig * field--string.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <span>EU Proposes Root and Branch Review of Its Flagship Sustainable Finance Disclosure Regulation</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-image--features.html.twig * field--node--field-image.html.twig * field--node--features.html.twig * field--field-image.html.twig * field--image.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-image field--type-image field--label-hidden field__item"> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_formatter' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_style' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-style.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image' --> <!-- BEGIN OUTPUT from 'core/modules/system/templates/image.html.twig' --> <img loading="lazy" src="https://www.alpha-week.com/sites/default/files/styles/article_full/public/2023-10/ESG-10.jpg?itok=BMf5SrA2" width="400" height="225" alt="Sustainable Finance" typeof="foaf:Image" /> <!-- END OUTPUT from 'core/modules/system/templates/image.html.twig' --> <!-- END OUTPUT from 'core/modules/image/templates/image-style.html.twig' --> <!-- END OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--created--features.html.twig x field--node--created.html.twig * field--node--features.html.twig * field--created.html.twig * field--created.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <span>Mon, 10/23/2023 - 11:54</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--body--features.html.twig * field--node--body.html.twig * field--node--features.html.twig * field--body.html.twig * field--text-with-summary.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p><span><span>The European Commission, in developing policy to achieve net zero and attract private investment to support the transition to a climate-neutral economy, has certainly (even admirably) led with its chin. Not for the first time, it has produced ambitious legislation which simply runs too far ahead of prevailing market and industry norms, and lacks sufficient clarity to provide market participants with their need for certainty.</span></span></p> <p><span><span>On 4 September 2023, the Commission launched a consultation on how well the Sustainable Finance Disclosure Regulation (“SFDR”) works in practice, eliciting debate and views from stakeholders about fundamental changes. In short, aspects of SFDR are not proving sustainable. Within 30 months of its flagship SFDR coming into effect, the Commission has declared a time-out to reconsider "potential shortcomings within the SFDR framework" and to acknowledge that the articles 6, 8 and 9 classifications, which were intended to govern disclosure across a wide spectrum of products ensuring substantiation of sustainability claims, have instead become de facto marketing labels, susceptible to greenwashing.  </span></span></p> <p><span><span>A major concern is that the article 8 label encompasses too broad a spectrum, with a remarkably low entry level (but with the same “label” as a more ambitious ESG product). In contrast, the UK FCA's proposals for a sustainability labelling regime posit product labels pitched higher than even the most robust article 8 product. The use of articles 8 and 9 as a de facto labelling regime together with a proliferation of national labels within EU suggests the market really does want labels to communicate ESG/sustainability performance of financial products. To be fair to the Commission, they share that insight.</span></span></p> <!-- THEME DEBUG --> <!-- THEME HOOK: 'filter_caption' --> <!-- BEGIN OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --> <figure role="group" class="align-right"><img alt="William Yonge" data-entity-type="file" data-entity-uuid="e0658d19-8a90-4c79-b1b7-851866e3c9c1" src="https://www.alpha-week.com/sites/default/files/inline-images/William-Yonge.jpg" width="200" height="200" loading="lazy" /><figcaption>William Yonge</figcaption></figure><!-- END OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --><p><span><span>Let's recap on SFDR before we consider the Commission's consultation. SFDR started applying on 10 March 2021, and requires financial market participants and financial advisers (“FMPs”) to disclose how they integrate sustainability risks and principal adverse impacts in their processes at both entity and product level. SFDR also introduces additional granular product level disclosures for article 8 and 9 products.</span></span></p> <p><strong><span><span><em>Manager level disclosures</em></span></span></strong></p> <p><span><span>SFDR requires FMPs to disclose their policies on the integration of sustainability risks in their investment decision-making process and remuneration policies, and whether, if so, how they consider the principal adverse impacts (“PAI”) of their investment decisions on sustainability factors.</span></span></p> <p><strong><span><span><em>Product level disclosures</em></span></span></strong></p> <p><span><span>The product level disclosure requirements are built on the principle that products making sustainability claims should substantiate them. They concern risk, adverse impact and sustainability performance information, prescribing which information should be included in pre-sales and post-sales documentation and on websites.</span></span></p> <p><span><span>Article 8 mandates specific disclosures for products that promote one or more environmental or social characteristics. Article 9 does so for products that have sustainable investment or a reduction in carbon emissions as their objective. Products that are not covered by article 8 or 9 have become known or labelled as article 6 products, and in some cases regarded unfairly as ESG-neutral, with investors driving demand for article 8 and 9 products.</span></span></p> <p><strong><span><span><em>Consultation</em></span></span></strong></p> <p><span><span>In something of a volte face, the Commission now consults on developing a sustainability product labelling regime, one that it concedes may not even take the article 8/9 distinction as its starting point, but start over entirely. The consultation seeks views on issues in the implementation of SFDR, for example PAI disclosures, lack of clarity about key concepts such as “sustainable investment”, existence of data gaps making it challenging for FMPs to comply, the usefulness of the entity level disclosures and even whether the SFDR should house such disclosures in the first place.</span></span></p> <p><span><span>However, the most startling aspects of the consultation are those that depart radically from the general philosophy of SFDR and are, broadly, twofold: </span></span></p> <ul><li><span><span>asking whether standardised product disclosures should apply to all products irrespective of their sustainability claims; </span></span></li> <li><span><span>exploring whether to introduce an intentional product labelling regime.</span></span></li> </ul><p><span><span>Furthermore, the proposed labelling regime draws on the UK FCA’s proposed approach to a UK product labelling regime suggesting four potential labels, three of which reflect the FCA’s sustainable impact label, sustainable focus label and sustainable improvers label and one of which in principle relies on screening alone, an area where FCA has not proposed a label. The Commission has also followed the FCA in positing that unlabelled products should be subject to naming and marketing rules to inhibit greenwashing. </span></span></p> <p><span><span>There will be industry concern about the prospect of having to overhaul existing SFDR-compliant systems following the investment made over the last few years. Wry smiles within the FCA are a likely reaction to the Commission’s willingness to let go of key planks on which SFDR was built, and in doing so draw unashamedly on FCA’s own policy-making. During Brexit, the UK was strident about no longer being a rule-taker (from the EU); ironically, one unexpected outcome of Brexit, in particular during more straitened economic circumstances, may be that the UK becomes at least occasionally a rule-giver to the EU, one worthy result of which would be less fragmentation and more global consistency.</span></span></p> <p><span><span>**********</span></span></p> <p><strong><em>Wiliam Yonge</em></strong><em> is </em><strong><em>Partner</em></strong><em> at </em><strong><em><a href="https://www.morganlewis.com/">Morgan Lewis &amp; Bockius LLP </a></em></strong></p> <p><em>***</em></p> <p><em>The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group</em></p> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-tags--features.html.twig * field--node--field-tags.html.twig * field--node--features.html.twig * field--field-tags.html.twig * field--entity-reference.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div class="field__item"><a href="/alternative-credit-guest-articles" hreflang="en">Alternative Credit Guest Articles</a></div> <div class="field__item"><a href="/hedge-funds-guest-articles" hreflang="en">Hedge Funds Guest Articles</a></div> <div class="field__item"><a href="/private-equity-guest-articles" hreflang="en">Private Equity Guest Articles</a></div> <div class="field__item"><a href="/real-assets-guest-articles" hreflang="en">Real Assets Guest Articles</a></div> <div class="field__item"><a href="/venture-capital-guest-articles" hreflang="en">Venture Capital Guest Articles</a></div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <drupal-render-placeholder callback="flag.link_builder:build" arguments="0=node&amp;1=10390&amp;2=bookmark" token="fmG4oyqgGyvkVFH9T-6rsSdE36exSvt_uqpJWhCZIWo"></drupal-render-placeholder> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-author--features.html.twig * field--node--field-author.html.twig * field--node--features.html.twig x field--field-author.html.twig * field--entity-reference.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <a href="/author/william-yonge" hreflang="en">William Yonge</a> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-content-role--features.html.twig * field--node--field-content-role.html.twig * field--node--features.html.twig * field--field-content-role.html.twig * field--list-string.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-content-role field--type-list-string field--label-above"> <div class="field__label">Content role</div> <div class="field__item">Public</div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> Mon, 23 Oct 2023 10:54:45 +0000 AlphaWeek Staff 10390 at https://alpha-week.com Making Good Use of the Calm After the Storm of Tax Season https://alpha-week.com/making-good-use-calm-after-storm-tax-season <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--title--features.html.twig x field--node--title.html.twig * field--node--features.html.twig * field--title.html.twig * field--string.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <span>Making Good Use of the Calm After the Storm of Tax Season</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--created--features.html.twig x field--node--created.html.twig * field--node--features.html.twig * field--created.html.twig * field--created.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <span>Mon, 09/25/2023 - 11:08</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--body--features.html.twig * field--node--body.html.twig * field--node--features.html.twig * field--body.html.twig * field--text-with-summary.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p><span><span><span>Congratulations to all of you tax directors and operations teams of hedge and private equity fund managers (particularly those managing funds-of-funds) and private wealth family offices who have successfully navigated (or are about to) another tax second season!  Celebrate with your team at the annual end-of-season events and take a few days to recuperate from all the late nights as your blood pressure (and adrenaline rush and stress levels) reduce to that of mere mortals.</span></span></span></p> <p><span><span><span>Before memories of tax season operations recede to a blur, some firms conduct a post-mortem to either informally reflect on – or more formally conduct an Operations Assessment to review – which processes worked well and which deserve a fresh look.</span></span></span></p> <p><span><span><span>Those firms that conduct informal reviews often do so internally, based on a combination of team meetings and suggestion-box comments submitted by team members.  These reviews often focus on the symptoms but perhaps not their underlying causes, but may well sufficiently address the issues – especially if few issues are raised.</span></span></span></p> <p><span><span><span>Other firms – especially those with more complex operations and processes – may elect to conduct a more formal Operations Assessment, spanning one or more of the three pillars that form the foundation of business operations: process, people and technology.  The rationale for conducting an Operations Assessment may be reactive or proactive, or a combination of the two.  Examples include:</span></span></span></p> <p><strong>Reactive: Pain points experienced when delivering the processes performed within operations:</strong></p> <ul><li><span><span><span>Delays in receiving and capturing incoming data (for example, from Schedules K-1 received from investments)</span></span></span></li> <li><span><span><span>Delays/errors in conveying and reconciling data between multiple processes and the software used to perform them</span></span></span></li> <li><span><span><span>Delays in responding to inquiries received from a portfolio manager or trader regarding the tax impact from trades under consideration, especially when liquidity requirements are time-sensitive</span></span></span></li> <li><span><span><span>Risk of or actually missing deadlines (e.g., for tax filings or expected timing of reporting to investors)</span></span></span></li> </ul><p><strong>Proactive: Planning/updates to address/meet future goals and targets:</strong></p> <ul><li><span><span><span>Business requirements</span></span></span></li> <li><span><span><span>Marketing goals</span></span></span></li> <li><span><span><span>Funding availability and limitations</span></span></span></li> <li><span><span><span>Resource availability and competencies</span></span></span></li> <li><span><span><span>Technical platform environments/constraints</span></span></span></li> <li><span><span><span>Leadership goals and commitments to stakeholders</span></span></span></li> </ul><p><span><span><span>Smaller, less complex, Operations Assessments can be led internally, if a resource inside the firm has the availability to devote to the project, experience in performing assessments, and familiarity with the processes, staff assignments and technology in use by the firm. More often, an external consultant is engaged to lead the engagement, working closely with leadership to ascertain their goals and with the individuals who have roles in the processes to be assessed. </span></span></span><span><span><span>From that point onward, engagements differ widely in scope, length, goals, and deliverables.</span></span></span></p> <p><strong><span><span><span>Considerations when selecting a consultant to perform an Operations Assessment</span></span></span></strong></p> <p>Is independence important?  The answer depends on your goals:</p> <p><span><span><span>Independence is important if: </span></span></span></p> <p><span><span><span>-</span></span></span> <span><span><span>Y</span></span></span><span><span><span>ou want the consultant’s deliverables and suggestions to be independent of any loyalty or preference to previous employers, specific approaches or products. </span></span></span></p> <p><span><span><span>-</span></span></span> <span><span><span>You do not want their proposals to be guided by an assumption that they will be selected to implement/execute their recommendations (using their teams, software, etc.).</span></span></span></p> <p><span><span><span>Independence is less of a consideration when selecting a consultant when:</span></span></span></p> <p><span><span><span>- There is an assumption that, once the consultant’s recommendation is approved, the consultant may or will be running or involved in the execution/delivery of the proposed project (e.g., involving the consultant’s own resources, software, etc.).</span></span></span></p> <p><span><span><span>- The consultant’s familiarity with your firm is viewed as a benefit – that offsets any perception of bias in their findings.</span></span></span></p> <p><span><span><span>The consultant should be familiar with and able to both assess your business process needs and translate them into a roadmap for implementation and – where required – specifications for the developers/vendors to address and deliver.</span></span></span></p> <p><strong><span><span><span>What makes a good consulting engagement – both Operations Assessments and consulting engagements in general:</span></span></span></strong></p> <p><span><span><span>First and foremost, Set Expectations – for both the consultant (who should help you with this) and the people in your firm with whom the consultant will engage (so they understand why they are being asked to speak with the consultant, and proactively defuse resistance to those conversations)</span></span></span></p> <p><span><span><span>Define the goals of the engagement: </span></span></span></p> <p><span><span><span>-</span></span></span> <span><span><span>What are you seeking to learn/accomplish?</span></span></span></p> <p><span><span><span>- What are the expected deliverables: A report? Presentation? A list of options? A definitive plan of action?</span></span></span> </p> <p><span><span><span>- Clarity re: whether the consultant’s role is limited to delivering a set of options or plan of action – or expected (or likely) to participate in executing the plan of action.</span></span></span></p> <p><span><span><span>Define the scope of the project:</span></span></span></p> <p><span><span><span>- What processes/operations are to be reviewed</span></span></span></p> <p><span><span><span>-</span></span></span> <span><span><span>Who will be interviewed (be specific re departments and names)</span></span></span></p> <p><span><span><span>-</span></span></span> <span><span><span>Length of project: When are the final deliverables due; Will there be interim milestones</span></span></span></p> <p><span><span><span>Come to agreement on cost and billing (e.g., monthly; upon achievement of milestones; something else?)</span></span></span> </p> <p><span><span><span>How will potential changes/updates to project scope be formally raised and agreed by both parties.</span></span></span></p> <p><span><span><span>The findings published from these Operations Assessments may be as varied as the number of firms that undertake them.  Outcomes/recommendations may include some combination of:</span></span></span></p> <p><span><span><span>- Changes to various processes: adjusting them, combining some of them, splitting others; outsourcing selected processes, or perhaps bringing others in-house to be performed internally.</span></span></span></p> <p><span><span><span>- In some cases, the changes described in the previous bullet may depend on the skill sets – or lack of skills – of the personnel currently charged with performing those tasks and processes – and perhaps the ease – or difficulty – with which their skills can be brought in line with the requirements to perform the tasks and operate the technology on which they are dependent.</span></span></span></p> <p><span><span><span>- Updates (consolidation of software, upgrades, replacement) of current technology – with the possibility of bringing some applications in-house and/or outsourcing others.</span></span></span></p> <p><span><span><span>- Recommendations may also include considering changes to the service providers utilized by your firm – or potentially asking your service providers to adjust how they deliver data to you to streamline your processes.</span></span></span></p> <p><span><span><span>The number of changes recommended in the findings delivered from the Operations Assessment are not an indicator of the value or success of the project.  On one hand, you may find that your operations are in good shape and significant change is not warranted (or will not produce significant impact to your business); on the other hand – especially if such an assessment has not been conducted for a number of years – the findings may offer an opportunity to streamline your operations, make them more efficient, and/or better able to address your goals and expectations.</span></span></span></p> <p><span><span><span>We hope that this abstract has provided an overview of what firms contemplating an Operations Assessment to review their just-ended tax season operations and engaging a consultant should take into consideration.</span></span></span></p> <p>**********</p> <p><em><span><span><span><a><strong>Gary A. Mills</strong></a> is Founder and Consultant at <a href="https://www.linkedin.com/in/garymills1/">Gary Mills Consulting LLC</a></span></span></span></em></p> <p><em><span><span><span>***</span></span></span></em></p> <p><em>The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group</em></p> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-tags--features.html.twig * field--node--field-tags.html.twig * field--node--features.html.twig * field--field-tags.html.twig * field--entity-reference.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div class="field__item"><a href="/alternative-credit-guest-articles" hreflang="en">Alternative Credit Guest Articles</a></div> <div class="field__item"><a href="/hedge-funds-guest-articles" hreflang="en">Hedge Funds Guest Articles</a></div> <div class="field__item"><a href="/private-equity-guest-articles" hreflang="en">Private Equity Guest Articles</a></div> <div class="field__item"><a href="/real-assets-guest-articles" hreflang="en">Real Assets Guest Articles</a></div> <div class="field__item"><a href="/venture-capital-guest-articles" hreflang="en">Venture Capital Guest Articles</a></div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <drupal-render-placeholder callback="flag.link_builder:build" arguments="0=node&amp;1=10237&amp;2=bookmark" token="pLHTw7nVnAvd6UMZo4M9ETBM9x088Dca2b7rYyRVy3Y"></drupal-render-placeholder> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-author--features.html.twig * field--node--field-author.html.twig * field--node--features.html.twig x field--field-author.html.twig * field--entity-reference.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <a href="/author/gary-mills" hreflang="en">Gary A. Mills</a> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-content-role--features.html.twig * field--node--field-content-role.html.twig * field--node--features.html.twig * field--field-content-role.html.twig * field--list-string.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-content-role field--type-list-string field--label-above"> <div class="field__label">Content role</div> <div class="field__item">Public</div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> Mon, 25 Sep 2023 10:08:02 +0000 AlphaWeek Staff 10237 at https://alpha-week.com How Can Organisations Turn Third-Party Security Risks Into Competitive Advantage? https://alpha-week.com/how-can-organisations-turn-third-party-security-risks-competitive-advantage <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--title--features.html.twig x field--node--title.html.twig * field--node--features.html.twig * field--title.html.twig * field--string.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <span>How Can Organisations Turn Third-Party Security Risks Into Competitive Advantage?</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--created--features.html.twig x field--node--created.html.twig * field--node--features.html.twig * field--created.html.twig * field--created.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <span>Mon, 09/25/2023 - 10:35</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--body--features.html.twig * field--node--body.html.twig * field--node--features.html.twig * field--body.html.twig * field--text-with-summary.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p><span><span><span><span>Alternative investment firms tend to be lean in headcount – yet they shoulder heavy workloads and great expectations. With investors and regulators increasingly looking towards these firms to deliver at the same level as organisations many times their size, their operational and security requirements closely reflect those of large-scale enterprises.</span></span></span></span></p> <p><span><span><span><span>In this high-pressure environment, investment firms are becoming more reliant on expansive networks of third-party providers. These relationships offer undeniable commercial advantages, helping firms to efficiently handle their day-to-day operations and continue delivering strong returns to investors. However, they also expose companies to heightened cyber risks.</span></span></span></span></p> <p><span><span><span><span>Now, as the industry prepares for sweeping new </span></span><a href="https://www.abacusgroupllc.com/blog/new-sec-rules-why-investment-firms-must-step-up-their-cybersecurity-oversight"><span><span>cybersecurity rules</span></span></a><span><span> proposed by the Securities and Exchange Commission (SEC), it is more important than ever for organisations to understand and manage their security risks. The proposal requires firms to establish, maintain, and enforce comprehensive written policies and procedures concerning cyber risk – including third-party risks – in addition to disclosing all security incidents within a tight 48-hour timeframe.</span></span></span></span></p> <p><span><span><span><span>Under this rising tide of regulatory scrutiny, firms must strengthen their vendor management programmes and take proactive steps to mitigate evolving third-party risks. At the same time, they should embrace the significant business benefits of these partnerships to maintain that all-important competitive edge. To achieve this, firms must find new ways to create value from risk.</span></span></span></span></p> <p><span><span><strong><span><span>Visibility and control</span></span></strong></span></span></p> <p><span><span><span><span>For smaller investment firms needing to focus their headcount on front-office tasks, third-party networks offer a wealth of commercial and operational advantages. Outsourcing back and middle office operations empowers these companies to channel their time, energy, and resources towards core business activities that drive profitable growth. </span></span></span></span></p> <p><span><span><span><span>However, having a broader network of third parties naturally expands the attack surface, creating more potential entry points for malicious actors. And the more partners, vendors, and suppliers that come on board, the harder it is for individual businesses to manage the risks. The dangers are particularly acute for investment firms, as the sheer volume of sensitive financial and personal data they hold - including information about investors, portfolio companies, trade positions and potential acquisitions – makes them highly lucrative targets for cyber-attacks. </span></span></span></span></p> <!-- THEME DEBUG --> <!-- THEME HOOK: 'filter_caption' --> <!-- BEGIN OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --> <figure role="group" class="align-right"> <!-- THEME DEBUG --> <!-- THEME HOOK: 'entity_embed_container' --> <!-- BEGIN OUTPUT from 'modules/contrib/entity_embed/templates/entity-embed-container.html.twig' --> <div alt="Tom Cole" data-embed-button="entity_browser_button" data-entity-embed-display="image:image" data-entity-embed-display-settings="{&quot;image_style&quot;:&quot;&quot;,&quot;image_link&quot;:&quot;&quot;,&quot;image_loading&quot;:{&quot;attribute&quot;:&quot;lazy&quot;}}" data-entity-type="file" data-entity-uuid="bcd810d8-14ec-4734-8351-0b0354e7556a" data-langcode="en" title="Tom Cole" class="embedded-entity"> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_formatter' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image' --> <!-- BEGIN OUTPUT from 'core/modules/system/templates/image.html.twig' --> <img loading="lazy" src="https://www.alpha-week.com/sites/default/files/inline-images/Tom-Cole.jpg" alt="Tom Cole" title="Tom Cole" typeof="foaf:Image" /><!-- END OUTPUT from 'core/modules/system/templates/image.html.twig' --><!-- END OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --></div> <!-- END OUTPUT from 'modules/contrib/entity_embed/templates/entity-embed-container.html.twig' --> <figcaption>Tom Cole</figcaption></figure><!-- END OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --><p><span><span><span><span><span><span>According to last year’s </span></span></span><a href="https://www.pwc.com/us/en/services/consulting/cybersecurity-risk-regulatory/library/global-digital-trust-insights/risks-posed-third-parties-and-supply-chain.html"><span><span><span>PwC Global Digital Trust Insights Survey</span></span></span></a><span><span><span>, less than half</span></span></span> <span><span><span>(</span></span></span>40%<span><span><span>) of organisations thoroughly understand their third-party cyber and privacy risks. The complexities of these interconnected relationships and networks can hide vulnerabilities in vendors’ security postures, making it difficult to identify and mitigate against specific weak points. Investment firms may also lack the internal headcount to enforce rigorous cybersecurity oversight on third parties, resulting in limited visibility and control over their security practices.</span></span></span></span></span></span></p> <p><span><span><strong><span><span>Cascading impacts </span></span></strong></span></span></p> <p><span><span><span><span><span><span>Firms cannot secure what they cannot see. But visibility is less of a challenge for sophisticated cyber criminals, who are becoming increasingly skilled at filling in the gaps and exploiting the blind spots within the broader financial services ecosystem. Aware that many alternative investment firms are maturing their own cybersecurity postures, attackers are now singling out third-party vendors as the weak link in the chain – and subjecting them to supply chain attacks. Therefore, despite all security measures implemented by the firm, malicious actors can still target them by infiltrating their vendors’ weak points, patiently waiting for the opportune moment to launch a destructive attack.   </span></span></span></span></span></span></p> <p><span><span><span><span>Any cyber incident that occurs via a supplier, vendor, or partner organisation has the potential to impact multiple others, compromising sensitive data and creating a domino effect of negative consequences. Businesses need only look at headlines around high-profile hacks – from the </span></span><a href="https://www.ft.com/content/20aa4844-2ebe-44dc-9550-7d950150e784"><span><span>Capita</span></span></a><span><span> data breach to the attack on financial software supplier </span></span><a href="https://www.abacusgroupllc.com/blog/4-steps-to-outsmart-the-hackers"><span><span>Ion Group</span></span></a><span><span> – to appreciate the disruption such attacks can cause. Organisations across the supply chain were left fearing the potential compromise of sensitive data, or the introduction of undisclosed backdoors within their own software.  </span></span></span></span></p> <p><span><span><span><span>A single supply chain compromise can also trigger subsequent supply chain crises. For example, software provider 3CX was recently hit by a </span></span><a href="https://krebsonsecurity.com/2023/04/3cx-breach-was-a-double-supply-chain-compromise/"><span><span>double supply chain attack</span></span></a><span><span><span><span>,</span></span></span></span><span><span> where the initial point of breach was malicious software nesting within an earlier supply chain incident – in this case, the compromise of a popular day trading app. Firms can no longer simply look out for number one – they must be hyperaware of the spectrum of ‘nth-party’ risks posed by their suppliers’ suppliers and so on. </span></span></span></span></p> <p><span><span><strong><span><span>Embracing regulations</span></span></strong></span></span></p> <p><span><span><span><span>All the while, tightening regulatory and compliance requirements are raising the pressure on firms. But when it comes to managing third-party risks, regulations should be looked at as friends, not foes. </span></span></span></span></p> <p><span><span><span><span>The proposed SEC rules will necessitate firms to adopt a comprehensive programme to manage and oversee their third-party providers, encompassing robust assessments of vendor and third-party risks. This requirement will help to shine a light on potential vulnerabilities and weaknesses within these complex networks. By surpassing the limitations of traditional due diligence questionnaires – which rarely give a true insight into a vendor’s security posture – investment firms will be empowered with greater overall visibility and control over third-party environments.</span></span></span></span></p> <p><span><span><span><span>Firms no longer have to develop their own interpretations of cybersecurity best practices - specific regulatory requirements can now guide them. These precise rules support organisations as they reduce their third-party risk exposure, ultimately helping them make more informed decisions about who they do business with.</span></span></span></span></p> <p><span><span><strong><span><span>Balancing risk and reward</span></span></strong></span></span></p> <p><span><span><span><span><span><span>Supported by regulations, investment firms can take proactive measures to strategically manage third-party risks - without sacrificing their competitive edge. Firstly, they must undertake a comprehensive due diligence process before establishing partnerships with potential vendors, carefully examining their policies, practices, and cybersecurity controls. This scrutiny should be a continuous practice as the relationship evolves and expands, allowing firms to stay vigilant and promptly address any changes in the vendor’s cyber risk profile.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Additionally, businesses should invest in the services of a vCISO (a virtual chief information security officer, whether internally or through a specialised provider. Having a designated expert with a deep understanding of the latest threats, trends, and technologies will help firms to identify and assess potential third-party risks, feeding into a more cohesive and holistic risk management strategy.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Security specialists should also continuously educate the C-suite on cyber and business risks, enabling firms to budget out costs for systems and processes that effectively manage third-party risk. These processes must then be seamlessly integrated into the organisation’s broader business operations and continuity plans. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Regular third-party risk assessments are another vital component of any robust vendor management programme. By conducting vulnerability scanning, penetration testing, and real-time monitoring of network traffic, firms can gain the end-to-end visibility they need to swiftly detect and respond to cyber threats. To strengthen their defences further, companies should establish a clear process for risk remediation process, holding third-party providers accountable for taking corrective measures to mitigate identified risks.</span></span></span></span></span></span></p> <p><span><span><span><strong><span><span><span>Building stronger partnerships</span></span></span></strong></span></span></span></p> <p><span><span><span><span><span><span>As the financial, reputational, and compliance implications of a cyber-attack mount, every alternative investment firm should be conducting due diligence and implementing a strong vendor management programme. However, some may need help in assessing and effectively managing the full spectrum of third-party risks due to limited in-house capabilities.</span></span></span></span></span></span></p> <p><span><span><span><span><span><span>This is when it becomes crucial to collaborate with a trusted provider with deep industry expertise and experience in the technological and regulatory complexities of the alternative investment landscape. The best partnerships will empower firms to establish mature and robust third-party risk management processes, incorporating regular due diligence and security best practice into their broader business operations. This enables firms to optimise their vendor relationships and confidently grow their connected networks without weakening their overall security posture.    </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>Alternative investment firms now have the opportunity to take back control and shrink the security blind spots across the third-party ecosystem. By taking a multi-layered, holistic approach, organisations can not only mitigate third-party risks but also capitalise on these relationships to enhance operational and commercial performance. </span></span></span></span></span></span></p> <p><span><span><span><span><span><span>**********</span></span></span></span></span></span></p> <p><em><strong>Tom Cole</strong> is Managing Director – UK &amp; Europe at <strong><a href="https://www.abacusgroupllc.com/">Abacus Group</a></strong></em></p> <p><em>***</em></p> <p><em>The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group</em></p> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-tags--features.html.twig * field--node--field-tags.html.twig * field--node--features.html.twig * field--field-tags.html.twig * field--entity-reference.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div class="field__item"><a href="/alternative-credit-guest-articles" hreflang="en">Alternative Credit Guest Articles</a></div> <div class="field__item"><a href="/hedge-funds-guest-articles" hreflang="en">Hedge Funds Guest Articles</a></div> <div class="field__item"><a href="/private-equity-guest-articles" hreflang="en">Private Equity Guest Articles</a></div> <div class="field__item"><a href="/venture-capital-guest-articles" hreflang="en">Venture Capital Guest Articles</a></div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <drupal-render-placeholder callback="flag.link_builder:build" arguments="0=node&amp;1=10236&amp;2=bookmark" token="hSLFVwnR16whkTedX3whZIYgs-X9xLIM4bwhyusImT8"></drupal-render-placeholder> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-author--features.html.twig * field--node--field-author.html.twig * field--node--features.html.twig x field--field-author.html.twig * field--entity-reference.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <a href="/author/tom-cole" hreflang="en">Tom Cole</a> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-content-role--features.html.twig * field--node--field-content-role.html.twig * field--node--features.html.twig * field--field-content-role.html.twig * field--list-string.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-content-role field--type-list-string field--label-above"> <div class="field__label">Content role</div> <div class="field__item">Public</div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> Mon, 25 Sep 2023 09:35:18 +0000 AlphaWeek Staff 10236 at https://alpha-week.com Carry On Divorce https://alpha-week.com/carry-divorce <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--title--features.html.twig x field--node--title.html.twig * field--node--features.html.twig * field--title.html.twig * field--string.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <span>Carry On Divorce</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-image--features.html.twig * field--node--field-image.html.twig * field--node--features.html.twig * field--field-image.html.twig * field--image.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-image field--type-image field--label-hidden field__item"> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_formatter' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_style' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-style.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image' --> <!-- BEGIN OUTPUT from 'core/modules/system/templates/image.html.twig' --> <img loading="lazy" src="https://www.alpha-week.com/sites/default/files/styles/article_full/public/2023-06/Divorce.jpg?itok=qk8O0Moe" width="400" height="225" alt="Divorce" typeof="foaf:Image" /> <!-- END OUTPUT from 'core/modules/system/templates/image.html.twig' --> <!-- END OUTPUT from 'core/modules/image/templates/image-style.html.twig' --> <!-- END OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--created--features.html.twig x field--node--created.html.twig * field--node--features.html.twig * field--created.html.twig * field--created.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <span>Mon, 06/19/2023 - 12:13</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--body--features.html.twig * field--node--body.html.twig * field--node--features.html.twig * field--body.html.twig * field--text-with-summary.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p><span><span><span><span>Are you a fund manager? Are you married or do you intend to get married? Ever wondered what would happen to your carry if you were to get divorced? Whether the funds in question are onshore, offshore, in private equity, hedge funds or venture capital - this is what you need to know…</span></span></span></span></p> <p><span><span><span><span>On a divorce in England and Wales there is an entitlement to share capital built up during the marriage, but there is no entitlement in law to share an ex-spouse's future income. So, is carry to be treated as future income, or capital? To be thrown in the marital pot and shared, and if so, in what proportions, or does the earner get to keep it all? </span></span></span></span></p> <p><span><span><span><span>There are a couple of reported judgments from the Courts that offer some guidance: </span></span></span></span></p> <ol><li><span><span><span><span>In the case of <em>B v B </em>[2013]</span></span> <span><span>EWHC 1232 (Fam), the husband was a fund manager, with carry in Funds A, B and C. The husband and wife had agreed that rather than the wife being bought out of her share of the carry, she would receive a percentage of the net amount as and when the husband received it, but the question was what percentage (if any) she should receive from each fund. In the judge's view it wasn't possible to apply a strict methodology to determine the answer.  </span></span></span></span></li> </ol><p><span><span><span><span>He said "<em>To achieve fairness it is necessary to recognise fully the tension between the fact that the wealth was in part generated by the use of expertise built up during the marriage and in part by the expenditure of effort after the separation. Both elements are important. I do not think this part of the case can be analysed precisely either by reference to the time involved in each phase of the process and/or its relative importance. It is a product of both to some extent </em>".</span></span></span></span></p> <p><span><span><span><span>From the conclusion the judge in this case reached, it seems that there were three important questions to consider when deciding what the wife should get, at the date of separation: </span></span></span></span></p> <p><span><span><span><span>(1) was the carry fully vested; </span></span></span></span></p> <p><span><span><span><span>(2) how much of the fund was invested; and </span></span></span></span></p> <p><span><span><span><span>(2) had the hurdle rate of the fund been achieved.  </span></span></span></span></p> <p><span><span><span><span>All of the judge's holistic considerations led him to conclude, without any numerical formula, that the wife should receive the following percentages of carry as at the date of trial:</span></span></span></span></p> <ol><li><span><span><span><span>50% in Fund A (at the date of separation: carry fully vested, fund fully invested and hurdle met);</span></span></span></span></li> <li><span><span><span><span>20% in Fund B (at the date of separation: carry fully vested, fund largely invested, but hurdle not met); and </span></span></span></span></li> <li><span><span><span><span>0% in Fund C (at the date of separation: 40% of carry vested, fund barely invested, and hurdle not met).</span></span></span></span></li> </ol><ol start="2"><li><span><span><span><span>In the more recent case of <em>A v M </em>[2021] EWFC 89, a different judge took a far more strict mathematical approach.   The judge devised a formula calculated linearly over time, which looked at the term of the fund, and the date of the first and final close, to determine the marital, and therefore shareable, element of the carry.</span></span></span></span></li> </ol><!-- THEME DEBUG --><!-- THEME HOOK: 'filter_caption' --><!-- BEGIN OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --><figure role="group" class="align-right"><img alt="Adele Pledger" data-entity-type="file" data-entity-uuid="3b98522c-05df-40f4-b257-9771e148596d" src="https://www.alpha-week.com/sites/default/files/inline-images/Adele-Pledger.jpg" width="200" height="200" loading="lazy" /><figcaption>Adele Pledger</figcaption></figure><!-- END OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --><p><span><span><span><span>The formula was A ÷ B = C% whereby:</span></span></span></span></p> <ul><li><span><span><span><span>A is the period (measured in months) from the establishment of the fund to the date of the trial; </span></span></span></span></li> <li><span><span><span><span>B is the number of months from fund establishment to first close plus the estimated term of the fund; and </span></span></span></span></li> <li><span><span><span><span>C is the marital fraction of the fund manager's carry, expressed as a percentage. </span></span></span></span></li> </ul><p><span><span><span><span>The projected value of the fund manager's carry is then multiplied by C% to give the marital carry, and the spouse should receive 50% of that amount when it is received.  </span></span></span></span></p> <p><span><span><span><span>It's always easier to understand formulas in action with a worked example, so here you go:</span></span></span></span></p> <p><span><span><span><span>In the case in question, the husband had carry in Fund 1 and in Fund 2.  </span></span></span></span></p> <p><span><span><span><span>Fund 1 was established in October 2016. The trial was in November 2021 (60 months after the fund was established).  The fund's first close was in March 2017 (5 months after establishment). The estimated term of the fund was 9 years/108 months. Therefore, for Fund 1: A = 60; B = 5 + 108 = 113; and C = 60 divided by 113 = 53%.  The wife should get 50% of 53% =<strong> 26.2%</strong>. </span></span></span></span></p> <p><span><span><span><span>Fund 2 was established in October 2018 (36 months before the trial). Its first close was in June 2019 (8 months after establishment), and it’s term was deemed to be 9 years/108 months. Therefore, for Fund 1: A = 36; B = 8 + 108 = 116; and C = 36 divided by 116 = 31%. The wife should get 50% of 31% =<strong> 15.5%</strong>. </span></span></span></span></p> <p><span><span><span><span>The judge was sympathetic to the husband's reluctance to his wife being a shadow partner in both funds, rather than just one, and so did a further calculation, taking into account the fact that Fund 2 is projected to yield 38% more carry value than Fund 1, to work out what her share should be of Fund 1 only (on the basis she wouldn't then get a share of Fund 2). The calculation sought to adjust A in Fund 1 in the above formula by reference to the longer term in Fund 2 and anticipated higher yield. So the recalculation for the wife's share in Fund 1 was as follows:</span></span></span></span></p> <p><span><span><span><span>Fund 1 A + (Fund 2 A multiplied by the % difference in value between Fund 1 and 2) = the new 'A' to slot into the above formula for Fund 1. So, on the basis that the figure for A in the Fund 1 formula was, as we know from above, 60, and for Fund 2 A was 36, and the projected estimated value of Fund 2 carry was 38% more than Fund 1 carry, the calculation was:  60 + 36*1.38 = 110. Thus, the revised A figure for Fund 1 is 110, B remains 113 per above, meaning C is 110 divided by 113, which equals 97.06% (50% of which is 48.53%). And so rather than receiving 26.2% of Fund 1 and 15.5% of Fund 2, the wife ended up receiving <strong>48.53%</strong> of Fund 1 and 0% of Fund 2.</span></span></span></span></p> <p><span><span><span><span>One thing that is clear from the above cases (neither case takes precedent over the other as they are both at the High Court level) is that different judges will apply different approaches when considering how to tackle these cases, and unfortunately you can't pick what judge you'll get in Court.   </span></span></span></span></p> <p><span><span><span><span>With this in mind, are there any actions that fund managers can take to try to protect their carry?  </span></span></span></span></p> <p><span><span><span><span>Here are my top tips:</span></span></span></span></p> <ol><li><span><span><span><span>If you're not yet married, enter into a pre-nuptial agreement prior to marriage, and address what happens to carry in that agreement.</span></span></span></span></li> </ol><ol start="2"><li><span><span><span><span>If you are already married, you could always get a post-nuptial agreement, addressing what should happen to that carry in the event of divorce.</span></span></span></span></li> </ol><ol start="3"><li><span><span><span><span>If you have concluded you want a divorce, don't delay.  The sooner it is objectively clear you have permanently separated, and the sooner you're able to resolve financial claims (and if necessary, get to a court trial), the less carry your spouse would have a claim to.  Note that in the case of A v M, the divorce petition was issued in July 2019 and the trial wasn't until November 2021, and it was the date of trial that was relevant in the formula, not the date of separation.  Whereas in B v B, when addressing how much carry the wife should get, the judge was more concerned with the status of the funds at the date of separation.</span></span></span></span></li> </ol><ol start="4"><li><span><span><span><span>Instruct a bright lawyer, who has experience of cases involving carry.  </span></span></span></span></li> </ol><ol start="5"><li><span><span><span><span>Consider if it is possible, and if you would prefer, to try to offset giving your spouse a percentage share of the carry, and instead give them other assets/money in lieu.</span></span></span></span></li> </ol><ol start="6"><li><span><span><span><span>If further significant work by you is required on the fund, and/or there are performance clawback provisions, make it clear and provide details - to your lawyer and your spouse.  </span></span></span></span></li> </ol><ol start="7"><li><span><span><span><span>If your spouse is going to receive a percentage share of the net carry, ask your lawyer to get input from a corporate lawyer on the drafting of the clauses in the divorce order.  Clarity in drafting can avoid further disputes down the line.  </span></span></span></span></li> </ol><p><span><span><span><span>**********</span></span></span></span></p> <p><em><span><span><span><span><strong>Adele Pledger</strong> is a Partner in the </span></span></span></span><span><span><span><span>Family team at <strong><a href="https://www.withersworldwide.com/">Withers LLP</a></strong> in London</span></span></span></span></em></p> <p>*****</p> <p><em>The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group</em></p> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-tags--features.html.twig * field--node--field-tags.html.twig * field--node--features.html.twig * field--field-tags.html.twig * field--entity-reference.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div class="field__item"><a href="/private-equity-guest-articles" hreflang="en">Private Equity Guest Articles</a></div> <div class="field__item"><a href="/hedge-funds-guest-articles" hreflang="en">Hedge Funds Guest Articles</a></div> <div class="field__item"><a href="/venture-capital-guest-articles" hreflang="en">Venture Capital Guest Articles</a></div> <div class="field__item"><a href="/alternative-credit-guest-articles" hreflang="en">Alternative Credit Guest Articles</a></div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <drupal-render-placeholder callback="flag.link_builder:build" arguments="0=node&amp;1=10093&amp;2=bookmark" token="OrDE6GHPEz43xUWm_08yxSkWf3Q4MgK26evRiU9RadQ"></drupal-render-placeholder> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-author--features.html.twig * field--node--field-author.html.twig * field--node--features.html.twig x field--field-author.html.twig * field--entity-reference.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <a href="/author/adele-pledger" hreflang="en">Adele Pledger</a> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-content-role--features.html.twig * field--node--field-content-role.html.twig * field--node--features.html.twig * field--field-content-role.html.twig * field--list-string.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-content-role field--type-list-string field--label-above"> <div class="field__label">Content role</div> <div class="field__item">Public</div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> Mon, 19 Jun 2023 11:13:32 +0000 AlphaWeek Staff 10093 at https://alpha-week.com The New Swiss Federal Act on Data Protection https://alpha-week.com/new-swiss-federal-act-data-protection <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--title--features.html.twig x field--node--title.html.twig * field--node--features.html.twig * field--title.html.twig * field--string.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <span>The New Swiss Federal Act on Data Protection</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--title.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-image--features.html.twig * field--node--field-image.html.twig * field--node--features.html.twig * field--field-image.html.twig * field--image.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-image field--type-image field--label-hidden field__item"> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_formatter' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image_style' --> <!-- BEGIN OUTPUT from 'core/modules/image/templates/image-style.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'image' --> <!-- BEGIN OUTPUT from 'core/modules/system/templates/image.html.twig' --> <img loading="lazy" src="https://www.alpha-week.com/sites/default/files/styles/article_full/public/2023-06/Switzerland.jpg?itok=D-TTnXyX" width="400" height="225" alt="Switzerland" typeof="foaf:Image" /> <!-- END OUTPUT from 'core/modules/system/templates/image.html.twig' --> <!-- END OUTPUT from 'core/modules/image/templates/image-style.html.twig' --> <!-- END OUTPUT from 'core/modules/image/templates/image-formatter.html.twig' --> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--created--features.html.twig x field--node--created.html.twig * field--node--features.html.twig * field--created.html.twig * field--created.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <span>Mon, 06/05/2023 - 11:40</span> <!-- END OUTPUT from 'core/modules/node/templates/field--node--created.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--body--features.html.twig * field--node--body.html.twig * field--node--features.html.twig * field--body.html.twig * field--text-with-summary.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-body field--type-text-with-summary field--label-hidden field__item"><p><span><span><span>The European General Data Protection Regulation (GDPR) entered into effect five years ago on 25 May 2018. Data protection is a hot topic across the globe, with important unsettled questions, such as transfers of personal data from Europe to other jurisdictions. Just recently, Meta was fined a record €1.2bn ($1.3bn) by European privacy regulators over the transfer of EU user data to the United States. Countries worldwide are enacting or amending their data protection regulations, from post-Brexit Britain to Ecuador, Argentina and Chile.</span></span></span></p> <p><span><span><span>On 1st of September 2023 Switzerland is enacting its New Federal Act on Data Protection (nFADP) with immediate effect. </span></span></span></p> <p><span><span><span>The nFADP will not only be relevant to Swiss resident businesses, as it will apply to the processing of personal data with actual or potential adverse effect to the privacy rights of individuals in Switzerland even if initiated outside of Switzerland. It substantially revises the Swiss data protection law of 1992 by responding to recent years’ fundamental changes in the technological and social landscape, strengthening the rights of consumers, granting them stronger self-determination in relation to their data, and aligning Swiss law to the GDPR. This will allow Switzerland to be recognized as a third country with an adequate level of data protection, allowing free data transfer between Switzerland and Europe and helping Swiss companies to remain competitive. </span></span></span></p> <!-- THEME DEBUG --> <!-- THEME HOOK: 'filter_caption' --> <!-- BEGIN OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --> <figure role="group" class="align-right"><img alt="Sandra Ezri" data-entity-type="file" data-entity-uuid="d9cab8ae-a99e-43e2-8aff-755ba7d95a3c" src="https://www.alpha-week.com/sites/default/files/inline-images/Sandra-Ezri.jpg" width="200" height="250" loading="lazy" /><figcaption>Sandra Ezri</figcaption></figure><!-- END OUTPUT from 'core/modules/filter/templates/filter-caption.html.twig' --><p><span><span><span><span>The main changes introduced by the nFADP are that personal data of legal persons will no longer be protected by the new law, genetic and biometric data are added to the definition of sensitive data, the principles of privacy by design and privacy by default are introduced, keeping a register of processing activities (ROPA) will be mandatory in some instances, prompt notification to the supervisory authority will be required in some events of a data security breach, and the concept of profiling is being introduced. </span></span></span></span></p> <p><span><span><span>The nFADP, its Ordinance and the Swiss Telecommunications Act (with cookie-related information obligations) apply to the processing of personal data by businesses and natural persons in all sectors of the economy (but not in the context of personal household uses). This article does not cover the requirements applicable to federal bodies.</span></span></span></p> <p><span><span><span>The nFADP brings data protection standards close to the GDPR with some main differences (amongst others) as follows:</span></span></span></p> <ol><li><span><span><span>Legal ground/legal bases (such as consent, a contract, a law etc.) is required under the GDPR in addition to the principles of fairness, transparency, purpose limitation, proportionality, accuracy and data security, whereas it is only required under the nFADP when processing sensitive data or to justify personality rights infringements. </span></span></span></li> <li><span><span><span>Sensitive data under the nFADP include two categories that the GDPR does not cover as sensitive data per se (data on administrative/criminal proceedings and sanctions/data on social security measures).</span></span></span></li> <li><span><span><span>Consent is required for any profiling under the GDPR but only in case of high risk profiling under the nFADP.   </span></span></span></li> <li><span><span><span>The designation of a DPO (data protection officer) is mandatory in some instances under the GDPR whereas it is not mandatory (but recommended) under the nFAPD. </span></span></span></li> <li><span><span><span>Notification time for data breach is 72 hours under the GDPR and as soon as possible under the nFADP.  </span></span></span></li> <li><span><span><span>Conducting a data protection impact assessment (DPIA) is mandatory both under the GDPR and the nFADP when processing poses a high risk to the rights and freedoms of individuals, but the duty to consult the supervisory authority in Europe in case of high risk despite measures taken to mitigate the risk can be replaced by consultation of the DPO (if there is one) under the nFADP and is only applicable in case of high risk despite the measures envisaged. </span></span></span></li> <li><span><span><span>Sanctions go up to EUR 20mn or 4% of the company’s worldwide annual revenue in Europe and CHF 250’000 against a responsible private person under the nFADP.</span></span></span></li> </ol><p><span><span><span><span>In addition to data protection laws, each industry, financial institutions included, may have additional sets of rules with data protection implications. </span></span></span></span></p> <p><span><span><span><span>Banks are subject to the regulations of the Swiss Financial Market Supervisory Authority (FINMA) on client data (i.e. the FINMA OpRisk Circular 2008/21 Annex 3 with detailed measures with respect to the storing, processing and transferring of electronic Card Identification Numbers), Know-Your-Customer duties, record-keeping obligations or the Automatic Exchange of Information and the Foreign Account Tax Compliance Act in tax matters. Banks (including fintech licensees) are subject to banking secrecy according to the Banking Act. </span></span></span></span></p> <p><span><span><span><span>Financial institutions (i.e. asset managers, trustees, managers of collective assets, fund management companies and securities firms) are also subject to a professional secrecy obligation under the Swiss Financial Institutions Act and according to the Financial Services Act, customers are entitled to receive a copy of all documents that the financial services provider holds about them (which corresponds to the right of access under the nFADP and which governs the right to information and therefore also the duty to provide information with regard to personal data).  </span></span></span></span></p> <p><span><span><span><span>The Swiss Civil Code, Criminal Code, Constitution and labour law also have provisions protecting personality and privacy rights. </span></span></span></span></p> <p><span><span><span>If your firm is already GDPR compliant you should only have little work to do to be compliant with the nFADP. On the other hand, if your firm does not yet comply with the GDPR and your activity has an impact on personal data of data subjects in Switzerland, whether you are based in Switzerland or abroad, you will need to run a data mapping and data processing analysis in order to implement and comply with the new law.</span></span></span></p> <p><span><span><span>**********</span></span></span></p> <p><em><strong>Sandra Ezri</strong> is Founder at <a href="https://www.linkedin.com/services/page/2809a63203a4389694/"><strong>Ezri Consulting Ltd</strong></a></em></p> <p><em>***</em></p> <p><em>The views expressed in this article are those of the author and do not necessarily reflect the views of AlphaWeek or its publisher, The Sortino Group</em></p> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-tags--features.html.twig * field--node--field-tags.html.twig * field--node--features.html.twig * field--field-tags.html.twig * field--entity-reference.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-tags field--type-entity-reference field--label-hidden field__items"> <div class="field__item"><a href="/alternative-credit-guest-articles" hreflang="en">Alternative Credit Guest Articles</a></div> <div class="field__item"><a href="/hedge-funds-guest-articles" hreflang="en">Hedge Funds Guest Articles</a></div> <div class="field__item"><a href="/private-equity-guest-articles" hreflang="en">Private Equity Guest Articles</a></div> <div class="field__item"><a href="/venture-capital-guest-articles" hreflang="en">Venture Capital Guest Articles</a></div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <drupal-render-placeholder callback="flag.link_builder:build" arguments="0=node&amp;1=10065&amp;2=bookmark" token="2mScHpwBCKObR8xVuWF0LqdKa1YpJgMMp_nm9iECg_A"></drupal-render-placeholder> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-author--features.html.twig * field--node--field-author.html.twig * field--node--features.html.twig x field--field-author.html.twig * field--entity-reference.html.twig * field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <a href="/author/sandra-ezri" hreflang="en">Sandra Ezri</a> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field--field-author.html.twig' --> <!-- THEME DEBUG --> <!-- THEME HOOK: 'field' --> <!-- FILE NAME SUGGESTIONS: * field--node--field-content-role--features.html.twig * field--node--field-content-role.html.twig * field--node--features.html.twig * field--field-content-role.html.twig * field--list-string.html.twig x field.html.twig --> <!-- BEGIN OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> <div class="field field--name-field-content-role field--type-list-string field--label-above"> <div class="field__label">Content role</div> <div class="field__item">Public</div> </div> <!-- END OUTPUT from 'themes/gavias_vinor/templates/fields/field.html.twig' --> Mon, 05 Jun 2023 10:40:18 +0000 AlphaWeek Staff 10065 at https://alpha-week.com