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Agio On Hedge Fund Cybersecurity And The Difficulty Of Securing Private Equity Firms

When thinking about how to start a private equity firm or a hedge fund, security should be on the list of priorities. Both financial service institutions have to handle a lot of sensitive data as well as monetary assets, which means that hedge fund cybersecurity or private equity cybersecurity is an area that needs a lot of attention.

Agio is a New York-based cybersecurity provider, having 9 years of experience in the industry and servicing healthcare and payments industries as well as financial services. Moreover, the company has experience when it comes to supporting the alternative investment area, specializing in private equity firms, asset managers, and hedge funds. They offer technology hosting, disaster prevention and recovery, monitoring, helpdesk, management, 360 cybersecurity programs, and more.

While both private equities and hedge funds pose a challenge when it comes to cybersecurity, it’s private equity firms that have it more difficult. Typically, hedge funds have more complex systems as well as more cash movements, data, and transactions, but those are not the only attributes that determine how complex the process of securing an entity is.

Private equities are bigger targets as far as cybercrime goes, due to the type of data, transaction information, surface area, and other elements that the firms deal with, all of them making it harder to secure the firm. Agio has managed hundreds of alternative asset managers, and concluded that certain aspects of the way private equity firms operate results in them needing heightened cybersecurity. However, hedge funds are not easy to secure either, and at the end of the day both types of funds need to be on the lookout in order to prevent cybersecurity threats or to detect and mitigate them. Both types need a strong governance program. The Due Diligence Questionnaire is one of the most common types of documents investors will receive from hedge funds. The DDQ, according to Agio, is a tool that can assist with two-way dialogue between hedge fund managers and investors. The DDQ can standardizes conversations that can often be difficult and nuanced to be had in person. Agio stresses the importance of cross checking data with the DDQ before formalizing a relationship.

Both private equity firms and hedge funds handle personal identifiable information, banking information, and personal health information, which are elements that hackers tend to find very attractive. It’s important to keep in mind that a hacker could easily monetize the information they got from a private equity firm that, for example, details acquisitions that affect public companies. Meanwhile, hackers would have more difficult time monetizing the data they would get from hedge funds.

Hedge funds focus on structured databases which contain position, trades and other types of data. On the other hand, private equities rely on unstructured documents such as PDFs, or files created with the Microsoft suite. Cybersecurity solutions are typically better suited for structured data as opposed to unstructured data sets.

Private equity firms have to go beyond reactive Securities & Exchange Commission compliance, and when it comes to their assets they have to focus on proactive protection. Phishing & vishing, insider threats, malware and ransomware, and even human error are elements that need attention, due to the fact that identifying, prioritizing and implementing strategies related to risk mitigation for security vulnerabilities represent a challenge that need to be handled in order to ensure that the sensitive data the firm deals with does not end up in the hands of a hacker.


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