Cybersecurity Challenges Hedge Funds and Private Equity Firms Face

Many businesses struggle with staying one step ahead of hackers, and alternative investment entities are no exception. Due to the nature of the hedge fund and private equity businesses, these firms must overcome a set of cybersecurity obstacles unique to their industry. Here are just a few examples of the challenges hedge funds and private equity firms face.

Lucrative Phishing Targets

It’s no secret that these firms serve high-net-work clients. Cybercriminals are aware of this fact and becoming more inventive with their phishing scams. It’s increasingly difficult to tell the difference between an email from a legitimate source and an imposter.

Higher Breach Consequences

A data breach can result in more than investors losing substantial sums. Any negative cybersecurity news can damage a firm’s reputation, erode trust, and cause current and prospective clients to look for another company to manage their money.

More Personal Threats

Criminals are expanding the scope of their attacks by using social media to learn more about their targets and even their family and friends. They’re becoming more adept at exploiting this information to their advantage.

Increased Cyberattacks

As hackers become more sophisticated, they find additional ways to disrupt a hedge fund or private equity firm’s business operations. They also have the resources and knowledge to evade security controls, allowing them to target more firms.

Selling Information

Cybercriminals aren’t just looking to steal funds in an account. They’re likely to sell the victim’s financial and personal data on the dark web, which exposes information to others who may use it for illegal purposes.

Demanding Transparency

Investors want to know that firms are doing everything possible to safeguard their money. They’re requiring firms to provide more information regarding their cybersecurity protocols.

Stringent Regulations

As data breaches become more pervasive, agencies that regulate the financial services industry are raising the private equity and hedge fund cybersecurity bar. The expectation is that firms implement tighter controls, including notifying clients of any breaches involving personally identifiable information.

Contact Agio for SEC, PCI, and FCA Compliance Testing Services

Agio can help your hedge fund or private equity firm meet the evolving regulatory requirements. Our governance programs include cybersecurity testing to help you identify potential weaknesses and vulnerabilities and take corrective measures. Contact us to learn more today.