Investment Considerations During COVID-19 ADISA Panel Discussion

Tuesday, May 5th, 2020 and is filed under AI Insight News

AI Insight’s Mike Kell, senior vice president – business development and program management, recently participated in an ADISA panel discussion regarding investment considerations during COVID-19. Panelists included moderator Lilian Morvay, principal and founder of Independent Broker Dealer Consortium, LLC (“IBDC”), along with Michael Schwartzberg, founding partner, Winget Spadafora & Schwartzberg; Gary Saretsky, founding partner, Saretsky Hart Michaels + Gould; Sheri Pontolillo, founder and director of InterWeb Insurance; and Bob Valker, managing director, Capital Forensics.

Following are some of the highlights of this discussion, including several helpful and actionable risk management best practices.

  • Arbitration claims increase in times of market dislocation. There’s no reason to think this time would be any different so its important to be prepared.
  • According to a recent Financial Advisor article, the Pandemic has driven 1 in 4 Americans to reach out to a financial advisor for the first time.
    • Being proactive with existing clients is especially important but there’s also a good opportunity for prospective clients as well to protect your own business.
    • Support your clients and your business by connecting people. For example, bring together a family you work with to put together a plan to support a specific cause or community need. This may allow you to talk with younger relatives, parents, or heirs. Neighbors may want to come together.
    • It’s a chance to lead and connect yourself with people around you. Positive for the community and business.
  • Best practices for market dislocations: Review all alternative products in your book and:
    • Understand exposures.
    • Take a hard look to ensure the proper due diligence was and is being done on an ongoing basis.
    • Documenting the due diligence.
    • Be aware of potential areas of risk (triage your risk) including but not limited to:
      • Concentration
      • Elderly clients with exposure to alts
    • Review the investment rationale, objectives, risk tolerance, paperwork, and ensure documentation is in place for all alternative investment decisions. Ensure that actions are backed up with verifiable data.
    • Ensure that you are taking the responsibility for analyzing your own business and knowing your risk. Don’t wait for attorney. Start now.
    • With more remote work, review your E&O insurance to ensure you are fully covered. Determine if cyber-security coverage is needed and that you have the appropriate technology in place.
  • Effective communication is critical, especially in times like this where there is fear and anxiety. Respond to the emotional concerns. Three suggestions for communications:
    • Get on the phone, call clients, do not avoid this. It’s not fun but silence will cause feelings to magnify. Acknowledgement helps to diffuse anxiety. In many ways, this market dislocation helps to highlight the benefit of alternatives and takes the argument against them away. It’s tougher to highlight alternatives when all market indexes are outperforming them. That’s not the case now.
    • Don’t wait to communicate, do it now, immediately.
    • Do it right. Listen to concerns but listen to what is not said. This is an amazing opportunity to really flesh out the true risk tolerance of clients and bring it to light. It might be painful, but it is helpful.
  • Phone calls are the best approach for communicating.
    • Texting is mostly prohibited and e-mail can be misinterpreted.
    • Phone calls are typically the best approach for communicating, and then confirm in writing or e-mail something verifiable from the conversation.
    • Firms may still have a small pocket of exposure in recent sales (ie: those who purchased them just prior to suspension), but big picture down the road this will be helpful.
    • Firms should have a documented rationale for suspensions or other offering actions.

Click here to watch the full replay.

COVID-19 Impact & Outlook – Alternative Investment Markets and Due Diligence Action Steps

Thursday, April 23rd, 2020 and is filed under AI Insight News

We recently hosted a webinar titled “COVID-19 Impact and Outlook, Alternative Investment Markets.” We were joined by three incredibly insightful speakers:

  • Randy I. Anderson, Ph.D., CRE, President of Griffin Capital Asset Management Company
  • Robert Hoffman, CFA, Managing Director, FS Investments
  • Richard Kimble, CFA, Portfolio Manager, Americas for the Nuveen Global Cities REIT

See the key takeaways from our discussion with them as well as due diligence action steps provided by Mick Law, PC, or watch the full replay here:

Richard Kimble, Nuveen

  • Real estate asset classes with shorter leases will suffer the most:
    • Hospitality, seniors housing, student housing, discretionary retail
    • Development will struggle
    • Some retail will close for good
  • Industrial, non-discretionary retail, and housing are in a better position:
    • Multifamily and single-family rentals, life-sciences, technology (towers, data centers)
    • Housing still has demographic trend benefits and now may be more difficult to own.
  • US will continue to be a safe haven for overseas investors. Manhattan will still be a focus, but some groups may look to diversify to other large US cities.
  • Real estate transactions are down:
    • Of the deals awarded pre-crisis, some have gone through with purchases thinking this will be shorter-term V-shaped recovery, some backed out, and some pushed out 30-60 days to see if underwriting needs to be modified.
    • Transactions slowing down but once there’s normalcy there will be a lot of transactions.
  • It is critical to use well-known and trusted valuation firms to properly assess risk:
    • They are using one of the largest third-party valuation firms that works with a number of clients and work with other appraisers similar to them to make sure the market is being consistent.
    • Making sure people are consistently pricing in risk is key.
    • For their fund, normally a third of the portfolio is appraised each month but during times like this they can appraise earlier.
  • In Nuveen’s real estate platform, they have collected 94% of April rent.
    • A handful have asked for payment plans and they are using creative strategies that can be used to ease the pain of the deferred rent.
    • Not really working through force majeure because this doesn’t qualify for it or other MAC clauses, non-essential retail clients are struggling the most, but they want to be part of the solution to help make sure as many companies stay in business and keep as many employees – not abating rent but helping to defer.
    • For example, many retailers asking for deferral for the next couple of months. They can work with tenants to amortize or add on to the end.
    • They have set up a task force with a hotline to help small businesses access funds to stay in business.
  • The real estate markets are in a stronger place than back in the global financial crisis (the GFC).
    • For example, CMBS issuance 2017-2019 was less than half 2006-2007 time period. There is more discipline in lending, looking at in-place cash flow vs. forward looking NOI, more equity in transactions.
    • Before COVID-19, they were maybe losing deals on the lending side due to pricing and structure or relationship, whereas before the GFC it was because other guy was giving more leverage. Covenants have also held up versus covenant lite environment pre-GFC.
  • Looking at where traded REITs are now relative to NAV, and where spreads are, we’re seeing tremendous opportunities.

Robert Hoffman, FS Investments

  • High yield bond markets will see volatility, defaults, downgrades, lack of CLO issuance, and fallout from the energy markets.
    • Defaults may hit 10% later this year, compared to mid-teens in the GFC.
    • Corporate bonds have proven to be resilient.
  • There’s never been two years in a row that the HY debt market has been negative.
    • When looking at the history of the high yield bond markets, when spreads are as wide as they are now, or around 800bps, the median 12-month forward return is 26%.
    • This is probably not the time for broad, passive allocations, but the volatility creates opportunities.
  • There will be volatility, but there are positives:
    • The speed to which the Fed came into the market with the stimulus packages is helping the markets work more normally so risk can be properly priced and help speed the recovery.
    • It also helps with resolving debt issues, if defaults or other actions can be worked out in a properly functioning market it lessens the impact.
  • Public markets are seeing issuance and liquidity.
    • Debt is more expensive and more situational but its moving.
    • The fifth largest deal occurred last week amidst the pandemic.
  • On the private debt side, most firms use reputable third-party valuation firms to mark to market as best and consistent as they can similar to real estate and there is also an analogous public market as an indication of value.
  • Debt markets were so strong coming into this, and there is a fair amount of dry powder.
    • Funds are more properly leveraged and have built up cash and been more defensive even prior to COVID-19.
    • Most managers are taking care of their own book first, working with borrowers, and then will look to be opportunistic.
  • Real estate debt is also in a better position than it was going into the GFC.
    • Debt service coverage ratios are better than before, LTVs are more appropriate.
    • Every downturn is different, but lenders are in a better position going into this.
  • On the corporate debt side, there’s a much greater prevalence of covenant lite than pre-GFC:
    • It remains to be seen what impact this has on the market and this could prove challenging.
    • Covenant-lite loans recovered better than covenant-heavy post GFC but not sure that will happen again with significant weakening of fundamentals.
  • Another factor that could be a challenge is a large shift to lower rated issuers from higher rated, and a higher percentage of loan-only Single B issuers as opposed to those issuing a loan and bond. However, ratings are higher than ever in history in the high-yield market and asset coverage is stronger than ever which may offset challenges.

Dr. Randy Anderson, Griffin Capital

  • There will be volatility and the full impact depends on how long the virus takes to work its way through
    • In this downturn as opposed to the GFC, two of the three legs of the chair are stable – fiscal (stimulus packages) and monetary (interest rate reductions) are a positive.
    • The virus is the third leg and is variable. There is reason to be optimistic about a recovery in Q3 2020 but more likely in Q4.
    • The IMF is forecasting the US economy to be down 6% 2020 and then stronger in 2021, up 4.7%.
  • Markets have stabilized recently as the majority of the fear has been priced in.
  • Many managers were already somewhat defensive going into this based on high real estate prices and low cap rates.
    • They were expecting slower GDP growth anyways and were focused on defensive sectors including multifamily and industrial and had increased liquidity.
    • Like Nuveen, they are seeing high levels of collections on multifamily. People need a place to live.
  • Public REIT markets overreacted by a factor of almost 3 times during the GFC and proved to be a great investment post GFC.
  • The forecast for real estate over the five to seven-year period hasn’t change, with 4-6% income and a similar amount based on appreciation based on inflation rates. With bumps and volatility. No one makes money trying to time the bottom.
  • They have employed low leverage and lines of credit were not drawn (similar across many managers), so now they can take advantage of opportunities.
  • May take some time to accurately price in risk, but most managers use highly competent third-party valuation experts who follow standards that are widely adopted. The standards require them to look at all conditions and fairly reflect those values.
  • One of the main things investors can be looking at is if managers have unfunded commitments.
    • It may be harder to raise capital in this environment, so you don’t want to have many outstanding unfunded commitments.
    • Also want to have enough cash on hand, liquid securities if it is possible in fund structure, and lines of credit.
    • It is important to play defense and then you also want to be positioned to play offense, when the third leg the virus starts to mitigate then markets will start to move and you want to be able to accretively acquire.

Due Diligence Action Steps (Provided by Mick Law, PC)

  • Monitor for status updates for funds you have exposure to.
    • Monitor for any suspensions of an offering, share redemptions, or distributions (AI Insight Alerts) and immediately communicate to investors.
    • Proactively communicate the potential.
  • Questions to ask sponsors in your discussions with them include have they:
    • Taken any proactive measures to protect asset value?
    • Adequately providing “specific information” to investors in offering materials and public filings about how COVID-19 “currently” affects, and may reasonably effect in the future, the operations and liquidity of such sponsors and their managed investment programs? The SEC has advised that it intends to monitor how companies are communicating with their investors concerning the effects of COVID-19.
    • Able to service its debt and any portfolio debt?
    • Able to continue operating without syndicating additional offerings in the short-term? (review financials)
    • Adjusting their distribution payment policies appropriately to account for the present and future effects of COVID-19?
  • For oil/gas sponsors that use reserve-based lines of credit,
    • Are they appropriately prepared to address borrowing base deficiencies and related loan repayments in the probable event that their credit limits are adjusted due to lower commodities prices?
  • For qualified opportunity fund (“QOF”) sponsors with identified asset funds,
    • What adjustments are they having to make to development timelines?
    • Do they still anticipate being able to meet the 30-month timeline to have their capital invested?
    • If not, are they reserving money to pay any potential penalties?
  • For QOF sponsors with partial or complete blind pool funds,
    • What percentage of capital is already committed to projects (i.e., do they have capital available to take advantage of declining asset prices)?

Working from home? See our tips help you be successful

Friday, March 27th, 2020 and is filed under AI Insight News

Your daily routine may be in disarray, but it’s business as usual at AI Insight since we have been successfully operating as virtual company for many years. As always, we’re here to help you with your AI Insight needs and anything else that might help you when working remotely.

To be successful working remotely, you need a strategy, focus and a little fun. We’ve compiled some resources that we’ve used in practice to help you accomplish this.

Get Started

It’s important to designate a specific area that you use solely as your workspace to establish your “work zone” not only for your benefit, but for family members who are at home with you. Traveling around your house with your laptop or working where you sleep invites interruption.

Stay Focused

It’s easy to become distracted by the TV, social media or the pile of dishes in the sink. Creating a schedule for yourself – including breaks and lunchtime as you would at the office – can help you concentrate on your work. Setting a specific work schedule will also help you set expectations for other family members who are at home and help you keep a healthy work-life balance.

Industry Resources

You may be used to attending industry conferences or face-to-face group meetings, which have been postponed or cancelled. AI Insight created a central resource to help you stay connected with industry groups such as ADISA, IPA, FINRA and more. Check back frequently as we will continue to post industry webinar events happening in lieu of conferences.

Technology Resources

Having the right equipment is essential to working from home. But, knowing how to make the most of technology tools can be challenging.

  • Cybersecurity Awareness

Stay Connected

We all know that miscommunication can happen over email and text. Convey your tone with a phone call instead of email when you can. Even better, turn on your video during online meetings to express your body language. Remember to test out your video feature before you use it publicly, so you can check your background surroundings and test your microphone.

This is also a good opportunity to get to know your co-workers on a personal level. At AI Insight, we’ve created a social channel within our Microsoft Teams platform to talk about topics unrelated to work and share photos on occasions like Halloween and St. Patrick’s Day. This helps us get to know each other better and stay connected.

Be Mindful

We’ve created a “Get Up & Move” rewards program at AI Insight to encourage everyone to walk away from their computer once an hour. We also host quarterly Lunch & Learns to help our team stay healthy in mind and body such as chair yoga sessions and meditation practices. Taking breaks can boost productivity and rejuvenate you when motivation drops.

Contact Us

From everyone at AI Insight, we want you to be safe and healthy. Again, we’ve been incorporating these practices for many years. If there’s something we can help you with on any of these topics, please reach out to us Monday through Friday from 8:00 a.m. to 6:00 p.m. at 877-794-9448 ext. 710 or any time at customercare@aiinsight.com.

Private Placement Data Insights: Days on Market and Capital Raise

Monday, February 24th, 2020 and is filed under AI Insight News

2019 was a record year for private placements on the AI Insight platform. Our December Private Placement Industry Report showed we added 200 new private placements to our coverage with an average target raise of $58.5 million, led by 1031s, opportunity zones and non-1031 real estate funds. We also reported that 158 private placements closed in 2019, having raised approximately 85% of their target.

We recently analyzed the private placements on our platform that have closed to new investors since we started reporting in 2009 for a few statistics: (i) how long was the average fund within each category on the market (days on market), (ii) what was the average and range of capital raise targets and (iii) how close did the average fund come to meeting its capital raise target.

Overall, there are 987 funds on our platform that have closed to new investors since we started tracking data in 2009. The average target raise was $43.8 million, ranging from $800,000 to $4.1 billion. The average fund was on the market for 347 days and raised approximately 76% of its target.

Following is a closer look at some of the primary private placement categories. We report these and other statistics in our industry reports.

Private Real Estate

  • 256 funds
  • Real estate and real estate related securities
  • LPs and LLCs
  • Excludes 1031 exchanges and opportunity zone funds
  • Target raise range per fund: $800k to $535 million
  • Average days on market: 391
  • Average raise as a percent of target
    • Up to $25 million: 4%
    • $25 million to $50 million: 3%
    • $50 million and up: 4%

 

 

 

 

 

 

 

 

 

 

1031 Exchanges

  • 442 funds
  • 427 Delaware Statutory Trusts (DSTs) / 15 Tenant-in-Common (TICs)
  • Target raise range per fund: $995k to $138.2 million
  • Average days on market: 210
  • Average raise as a percent of target
    • Up to $25 million: 6%
    • $25 million to $50 million: 6%
    • $50 million and up: 100%

 

 

 

 

 

 

 

 

 

 

Energy

  • 126 funds
  • LPs and LLCs
  • Target raise range per fund: $3.5 million to $300 million
  • Average days on market: 313
  • Average raise as a percent of target: 8%

 

 

 

 

 

 

 

 

Opportunity Zones

  • This is a new category with only five funds on our platform that have closed to date and we currently cover 15 additional funds.
  • Target raise range per closed fund: $7 million to $335 million
  • Average days on market: 248
  • Average raise as a percent of target: 6%

Other Resources

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Charts and data based on programs activated on the AI Insight platform.

Activated means the program and education module are live on the AI Insight platform. Subscribers can view and download data for the program and access the respective education module.

On a subscription basis, AI Insight provides informational resources and training to financial professionals regarding alternative investment products and offerings. AI Insight is not affiliated with any issuer of such investments or associated in any manner with any offer or sale of such investments. The information above does not constitute an offer to sell any securities or represent an express or implied opinion on or endorsement of any specific alternative investment opportunity, offering or issuer. This report may not be shared, reproduced, duplicated, copied, sold, traded, resold or exploited for any purpose. Copyright ©2020 AI Insight. All Rights Reserved.

 

2020 FINRA Priorities Letter – Focus on Regulation Best Interest, Supervision and Suitability

Wednesday, February 12th, 2020 and is filed under AI Insight News

FINRA recently issued its 2020 Risk Monitoring and Examination Priorities Letter along with its 2019 Report on Examination Findings and Observations. As expected, Regulation Best Interest (Reg BI) takes the lead in this discussion. These reports also highlight, among other things, the continued focus on sales practices regarding supervision and client suitability.

Specifically, the 2020 Priorities Letter states,

In the first part of the year, FINRA will review firms’ preparedness for Reg BI to gain an understanding of implementation challenges they face and, after the compliance date, will examine firms’ compliance with Reg BI, Form CRS and related SEC guidance and interpretations. FINRA staff expects to work with SEC staff to ensure consistency in examining broker-dealers and their associated persons for compliance with Reg BI and Form CRS.

The 2019 Findings Report stated,

Some firms did not have adequate systems of supervision to review that recommendations were suitable in light of a customer’s individual financial situation and needs, investment experience, risk tolerance, time horizon, investment objectives, liquidity needs and other investment profile factors. This report shares some new suitability-related findings, as well as additional nuances on prior years’ findings.

Cybersecurity

At the end of the letter, FINRA addresses firm operations, technology and cybersecurity noting, FINRA recognizes that there is no one-size-fits-all approach to cybersecurity, but expects firms to implement controls appropriate to their business model and scale of operations.

Key Takeaways

  • See this checklist, which explains key differences between FINRA rules and Reg BI and Form CRS.
  • Carefully review and understand the specific suitability requirements for each non-traded or private placement program utilized and ensure that your firm has a documented process in place to monitor the compliance with suitability requirements.
  • Document the due diligence process – remember, if it isn’t documented, it was never done.
  • Review how regulators look at cybersecurity and key strategies to be compliant. Click here for additional resources and take the CE Course, “Cybersecurity Awareness for Financial Professionals”.

Let AI Insight help you stay compliant

  • Discover how you can create efficiencies in your due diligence review process using our database of 350+ alternative investments to source new products as well as analyze and compare hundreds of alternative investment programs, including non-traded programs, private placements, and alternative mutual funds.
  • Demonstrate your due diligence by conducing product-specific training on the features, risks and suitability for hundreds of offerings.
  • Document what you’re doing to support your firm’s regulatory requirements in a transparent way. AI Insight captures all of the activity you and your firm members complete within the platform including training modules, offering document reviews and research conducted.

Resources

December Private Placement Industry Insights

Monday, January 13th, 2020 and is filed under AI Insight News

We recently released our December Private Placement Insights. See the highlights from the report below, or if you are a subscriber, log in now to see the entire report.

  • More private placements were added to our coverage in 2019 than ever before with record months in November and December. The 200 private placement funds added during the year were slightly smaller in overall target raise than 2018, with the aggregate just 1.3% above last year despite the increased number of funds.
  • The industry was led primarily by continued growth in 1031 exchanges and the addition of Opportunity Zone funds. Private equity/debt activity picked up late in the year, as did conservation contributions and energy funds. Other real estate, which includes non-1031 real estate LLCs and LPs trailed, with fund sizes significantly smaller than in prior years.
  • As of January 1st, AI Insight covers 172 private placements currently raising capital, with an aggregate target raise of $16.1 billion and an aggregate reported raise of $7.7 billion or 48% of target. The average size of the current funds is $93.2 million, ranging from $3.4 million for a single asset fund to $2.2 billion for a sector specific private equity/debt fund.
  • 158 private placements closed in 2019, having raised approximately 85% of their target.
  • ON DECK: as of January 1st, there were eight new private placements coming soon.

 

 

 

 

 

 

 

 

 

 

 

Access the full Private Placements report and other hard-to-find alts data

AI Insight’s Industry Reporting capabilities help you review alternative investment trends and historical market data for Private Placements, Non-Traded REITs, BDCs,  Closed-End Funds, and Alternative Mutual Funds. Receive up to 24 extensive reports per year to help broaden your alternative investment reviews.

Log in or subscribe to AI Insight to further research, sort, compare, and analyze all of the private and public funds in our coverage universe. See who’s new in the industry and what trends are impacting the alts space.

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Chart and data as of Dec. 31, 2019, based on programs activated on the AI Insight platform as of this date.

Activated means the program and education module are live on the AI Insight platform. Subscribers can view and download data for the program and access the respective education module. 

On a subscription basis, AI Insight provides informational resources and training to financial professionals regarding alternative investment products and offerings. AI Insight is not affiliated with any issuer of such investments or associated in any manner with any offer or sale of such investments. The information above does not constitute an offer to sell any securities or represent an express or implied opinion on or endorsement of any specific alternative investment opportunity, offering or issuer. This report may not be shared, reproduced, duplicated, copied, sold, traded, resold or exploited for any purpose. Copyright ©2020 AI Insight. All Rights Reserved.

November Private Placement Industry Insights

Monday, December 9th, 2019 and is filed under AI Insight News

We recently released our November Private Placement Insights. Highlights from the report include:

  • November was a record month for private placements, with 30 new funds looking to raise $854 million added to our coverage.
  • Our overall private placement coverage is up year-over-year in terms of new fund coverage and aggregate target raise, led primarily by 1031s and Opportunity Zones. Non-1031 real estate fund activity has picked up again, after trailing most of the year.
  • As of December 1st, AI Insight covers 184 private placements currently raising capital, with an aggregate target raise of $16.8 billion and an aggregate reported raise of $7.9 billion or 47% of target. This includes the 177 private placements added to our coverage in 2019. The average size of the current funds is $90.9 million, ranging from $3.4 million for a single asset fund to $2.2 billion for a sector specific private equity/debt fund.
  • As of December 1st, 122 private placements have closed year-to-date which have raised approximately 88% of their target.
  • As of December 5th, there were twelve new private placements coming soon.

 

 

 

 

 

 

 

 

 

 

 

Access the full Private Placements report and other hard-to-find alts data

AI Insight’s Industry Reporting capabilities help you review alternative investment trends and historical market data for Private Placements, Non-Traded REITs, BDCs,  Closed-End Funds, and Alternative Mutual Funds. Receive up to 24 extensive reports per year to help broaden your alternative investment reviews.

Log in or subscribe to AI Insight to further research, sort, compare, and analyze all of the private and public funds in our coverage universe. See who’s new in the industry and what trends are impacting the alts space.

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Chart and data as of Nov. 30, 2019, based on programs activated on the AI Insight platform as of this date.

Activated means the program and education module are live on the AI Insight platform. Subscribers can view and download data for the program and access the respective education module.

On a subscription basis, AI Insight provides informational resources and training to financial professionals regarding alternative investment products and offerings. AI Insight is not affiliated with any issuer of such investments or associated in any manner with any offer or sale of such investments. The information above does not constitute an offer to sell any securities or represent an express or implied opinion on or endorsement of any specific alternative investment opportunity, offering or issuer. This report may not be shared, reproduced, duplicated, copied, sold, traded, resold or exploited for any purpose. Copyright © 2019 AI Insight. All Rights Reserved.

Are you doing enough to protect client data?

Friday, December 6th, 2019 and is filed under AI Insight News

Be proactive about internet security risks and unauthorized data access that can impact clients and your business.

The financial services industry is certainly aware of potential security vulnerabilities and risks. While protections are in place, cybersecurity isn’t keeping pace with the technology advances in the financial services industry according to “The State of Software Security in the Financial Services Industry”. The survey conducted as part of the report also shows that 65% of respondents are concerned with complying with cybersecurity requirements.

 

 

 

 

 

 

 

 

Source: The State of Software Security in the Financial Services Industry

How does your firm compare?

The research report was commissioned by the Synopsys Cybersecurity Research Center (CyRC) and conducted by the Ponemon Institute. It includes a survey of over 400 IT security practitioners in various sectors of the financial services industry, including banking, insurance, mortgage lending/processing, and brokerage.

Read the detailed survey results here to see how your firm compares, including:

  • The software security posture of financial services companies
  • Risks to financial software and applications
  • Security practices in the design and development of financial service software and technologies

How regulators look at cybersecurity and key strategies to be compliant

Not only is data security a concern, but regulators have also taken interest in cybersecurity risks that may impact financial firms. Below are five things every regulator looks for during an audit:

  • Risk Register
  • Framework and Assessment of the Security Program
  • Strategy and Roadmap
  • Incident Response Plan
  • Governance & Centralized Management

7 security tips for financial firms

Take a look at 7 security tips for financial firms to learn about steps you can take such as training, establishing policies and securing devices to help lessen your security risks. The first tip recommends employee training, which the Ponemon Institute study mentions is often not mandated within organizations.

AI Insight collaborated with Docupace Technologies, LLC and Beacon Strategies, LLC to develop a CE Course, “Cybersecurity Awareness for Financial Professionals” to help you better understand the regulatory focus on cybersecurity, the threat landscape and practical things you can do to protect client data. This course is eligible for 1 credit toward the CFP® and other designations. Learn more

Have you reviewed your policies for non-traditional ETFs?

Wednesday, November 20th, 2019 and is filed under AI Insight News

Considerations when working with non-traditional ETFs

North American Securities Administrators Association (NASAA) recently released a report recommending that broker dealers review policies and procedures for non-traditional exchange traded funds (ETFs).

“The NASAA report recommends tailored supervisory procedures be established for firms that allow leveraged and/or inverse ETF transactions. Further, that the supervisory procedures address the heightened and specific risks associated with these complex products.”

Click here to download the full report.

Be proactive to fully understand non-traditional ETFs

Leveraged ETFs are investment vehicles for sophisticated investors who are looking to gain short-term magnified exposure to the markets. However, it’s important to clearly understand that their unique characteristics come with inherent risk. Take AI Insight’s CE course, Introduction to Leveraged and Inverse ETFs, to help you understand the composition of leveraged ETFs, mechanics of how they operate, and risks associated with them. This course is eligible for 1 CE credit toward the CFP® and other designations.

October Private Placement Industry Insights

Friday, November 8th, 2019 and is filed under AI Insight News

We recently released our October Private Placement Insights. Highlights from the report include:

  • October private placement activity picked up after a slow September, primarily in the 1031 category.
  • Our overall private placement coverage is up year-over-year in terms of new fund coverage and aggregate target raise, led primarily by 1031s and Opportunity Zones, while most other categories remain below last year’s levels.
  • Our coverage of hedge funds and managed futures has not expanded in 2019. We discussed this in our September Private Placements podcast. We believe the minimal activity in the hedging and futures space can be attributable to a few factors. One is that funds and fund-of-funds used by many retail firms tend to be larger with a perpetual life that have been around for many years and used as needed. Allocations to hedging and futures strategies also tend to be smaller in the retail channel than the institutional side, so fewer options are available and many use liquid alternatives for these allocations, where we have seen a lot of growth and increased coverage in recent years. Additionally, the strong equity market over the last decade has minimized the focus on hedging and futures strategies.
  • As of November 1st, AI Insight covers 171 private placements currently raising capital, with an aggregate target raise of $16.2 billion and an aggregate reported raise of $7.6 billion or 46.9% of target. This includes the 147 private placements added to our coverage in 2019.
  • As of November 1st, 111 private placements have closed year-to-date which raised approximately 86% of their target raise. While there are still two months remaining, funds this year have come closer to their targets than last year, when the 160 private placements that closed in FY 2018 raised approximately 63% of their target.

Access the full Private Placements report and other hard-to-find alts data

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Chart and data as of Oct. 31, 2019, based on programs activated on the AI Insight platform as of this date.

 Activated means the program and education module are live on the AI Insight platform. Subscribers can view and download data for the program and access the respective education module.

 On a subscription basis, AI Insight provides informational resources and training to financial professionals regarding alternative investment products and offerings. AI Insight is not affiliated with any issuer of such investments or associated in any manner with any offer or sale of such investments. The information above does not constitute an offer to sell any securities or represent an express or implied opinion on or endorsement of any specific alternative investment opportunity, offering or issuer. This report may not be shared, reproduced, duplicated, copied, sold, traded, resold or exploited for any purpose. Copyright © 2019 AI Insight. All Rights Reserved.