In a recent Crestbridge Alternative Managers’ Mood Index (CAMMI) survey, results highlighted the growing concern of investors in cybersecurity during the fundraising due diligence process in the fund management industry. The firm writes that the increasing reliance on digital systems and the rapid pace of technological innovation leaves the industry open to various cyber threats such as data breaches, ransomware attacks and phishing scams.
The CAMMI survey conducted by Crestbridge revealed that a majority of respondents (71.43 per cent) identified cybersecurity as one of the top concerns investors raised with them during fundraising due diligence processes that took place through 2022. Investment funds hold a considerable amount of financial data, making them an attractive target for hackers seeking financial gain. Investors are increasingly concerned about the potential financial and reputational damage that may arise from cyber-attacks on their fund managers.
Shaun Davies, Director, Client Operation for Crestbridge says: “Cybersecurity is of the utmost importance to investors, regulators and fund managers. By virtue of their resources, larger fund managers are better able to defend themselves from and educate their staff around cyberthreats, but mid-market managers may not be sufficiently scaled to do so to the same degree. Mid-market managers may therefore find it worthwhile working with partners who can offer robust measures to safeguard their data on their behalf and who continuously invest in systems and employee training to stay ahead of any emerging threats.”
Regulators across the globe have recognised the importance of cybersecurity and the potential vulnerabilities within the asset management industry and have implemented various regulations and compliance standards for investment funds. Examples of these are The UK’s Fraud Act 2006 and applicable Data Protection Acts, The Computer Misuse Act 1990, Jersey’s Cybercrime Law 2019 and in the US, the 2021 State & Local Government Cybersecurity Act, the firm writes.
Shaun Davies says: “As the financial services sector continues to embrace digital technologies, the importance of cybersecurity in the fund management industry cannot be overstated. The CAMMI survey results indicate that investors are acutely aware of the potential risks and are seeking fund managers who prioritise cybersecurity. By implementing best practices, investing in employee training, and staying ahead of emerging threats, fund managers can effectively address investor concerns, safeguard sensitive information, and maintain the trust of their clients. Ultimately, strong cybersecurity measures will be a crucial factor in the success and longevity of fund managers across all asset classes and businesses.”