LPs say the security of their data in the hands of a GP outweighs concerns around returns or fee levels, and a data breach is the most likely way for a GP to get fired, according to a survey by the CFA Institute.
Underscoring how important the issue of data security has become, investors said they were more likely to drop a manager for a data or confidentiality breach than under performance. The use of data and technology is increasingly central to LPs’ strategies and this survey shows investors are increasingly concerned about the handling of that data.
The CFA Institute’s annual trust report surveyed 829 institutional investors with assets of $50 million or more in key global markets. When assessing satisfaction with a GP, 82 percent of institutional investors said reliable measures to protect their data was the most important factor, outranking fee disclosure and returns; 74 percent were satisfied with the security measures put in place by their GPs; 38 percent would terminate a GP relationship because of a data breach; 34 percent would do so because of under performance.
When considering measures that could boost trust, investors said technology had a key role to play, with 63 percent believing blockchain had the potential to increase trust.
Looking to the future, more than half of institutional investors believe a financial crisis is likely or very likely within the next three years, and a quarter of respondents believe it will be sparked by a major cyberattack. Global or national political disputes are seen as the primary spark for the next financial crisis – 80 percent believe their managers are well prepared to deal with the effects of a new financial crisis.