Looking to weaponize cybersecurity?
Hackers and cybercriminals are getting smarter and more aggressive every year. Alternative investment firms are rarely targeted “accidentally.” They hoard large amounts of valuable data. Trade secrets. Investor information. Proprietary investing strategies. It’s all on the table.
Here’s the cybersecurity landscape for most hedge funds and private equity firms:
Protecting investor data and preventing breaches is a business-critical concern. But most firms only treat security like an annoying IT expense. They need to think differently.
Securing your investors’ funds and personally identifiable information (PII) should be a core competitive advantage. Funds with bulletproof security attract more capital. Pass due diligence quicker. And earn stronger reputations in the marketplace.
Let’s dive into how alternative investments firms can weaponize cybersecurity.
You’ll learn:
- Why Alternative Investment Firms Are Such Prime Targets
- DDoS Attacks Are Crushing The Financial Services Industry
- Why Investors Care About Your Cybersecurity Strategy
- How To Build A Competitive Advantage Around Cybersecurity
Why Alternative Investment Firms Are Such Prime Targets
If you had to guess who cybercriminals love to target, would you guess alternative investment firms?
If so, you’re correct. And here’s why:
Alternative investment firms are some of the most desirable targets in the world.
Why? Alternative investments typically manage billions of dollars of assets. Billions of dollars means billions of reasons for hackers to target your firm. They store valuable PII about investors. Confidential data about proprietary trading algorithms. Sensitive deal information. Basically, any sensitive data that can be sold on the dark web for cold, hard cash.
Want to know more unfortunate details?
Alternative investment funds also tend to have smaller teams. Small teams mean smaller IT departments. Smaller cybersecurity budgets. More reliance on third-party vendors. This creates openings that cybercriminals attack every day.
DDoS security should be top-of-mind for every fund manager. Without a dedicated DDoS mitigation plan and solution, your firm is vulnerable to attacks that can take your systems offline instantly. Partnering with a managed security service provider (MSSP) like Red-Button DDoS experts can arm your firm with enterprise-grade DDoS security ready to stop large-scale attacks at the firewall.
The average data breach cost $4.88 million in 2024. That’s enough to destroy the majority of mid-sized hedge funds.
DDoS Attacks Are Crushing The Financial Services Industry
Take a minute and read this stat:
DDoS attacks across the entire financial services industry spiked 117% in the last half of 2024.
That is absolutely staggering.
Distributed Denial of Service (DDoS) attacks are designed to flood a network or online platform with useless traffic. Basically, hackers try to overwhelm your systems and take everything offline. Which results in angry investors who can’t access their accounts.
So how does this relate to alternative investments?
If your website or trading platform suddenly goes down, investors lose trust. Alternative investments rely on trust.
Proper enterprise DDoS security should be considered table stakes for your firm. We’ve seen record numbers of large and sophisticated attacks targeting financial services. Your funds could be next.
Imagine if your fund got hit with a multi-vector DDoS attack during earnings season. Countless trades would be missed. Investors would be panicked. And you’d be left dealing with the PR fallout.
Why Investors Care About Your Cybersecurity Strategy
Did you know cybersecurity is quickly becoming a fund-raising tool?
More investors are asking questions about cybersecurity than ever before. Cybersecurity questions are showing up in DDQs. Investors want to know your cybersecurity strategy. Do you have proper DDoS mitigation? Who are your third-party vendors? How do you manage cyber risk?
The data speaks for itself…
Cybersecurity was the most common question across all industries in 2023’s fund-raising season. According to a report by auditing firm CohnReznick, cybersecurity concerns doubled from the previous year.
In fact, investors are requesting “a deep dive on cybersecurity measures including technology usage and governance.”
When raising capital, cybersecurity is no longer optional. A strong cybersecurity program can be the deciding factor on where investors allocate their capital.
Make sense?
Investors want to know you have:
- Enterprise DDoS security measures in place
- Strong access controls
- An incident response plan that has been tested
If you can provide that peace of mind, investors will fund you. Simple as that.
How To Build A Competitive Advantage Around Cybersecurity
Implementing cybersecurity as a competitive advantage starts with a shift in mindset.
Cybersecurity plans shouldn’t be treated as just another line item in the IT budget. Building cybersecurity into your firm’s culture starts with identifying weaknesses before hackers do.
Here’s a quick blueprint every fund manager can implement:
Run a cybersecurity risk assessment. Every firm has unique weaknesses. Run a cybersecurity assessment to discover where your firm is most vulnerable. Then you can prioritize where to focus your resources.
Prioritize DDoS security. Remember how DDoS attacks are climbing across financial services? If you don’t have proper DDoS mitigation your fund could be next. Partner with a DDoS mitigation provider that offers enterprise-level protections.
Create and test an incident response plan. Document what to do if your network gets breached. Then test your plan with regular employee training. Hackers will always find a way in. A documented incident response plan allows you to respond and recover faster.
Educate employees. 80% of cyberattacks are caused by employee error. Phishing scams. Social engineering. Plain old mistakes. Whatever the cause, humans are cybersecurity’s weakest link. Train employees on cybersecurity best practices. It’s easy and effective.
Document, document, document. Show investors you take cybersecurity seriously by keeping detailed records of cybersecurity policies, vendor audits, and security compliance certificates. The more documentation you have, the smoother your DDQ process will be.
Alternative investment firms with strong cybersecurity protections experience half the breach incidents as other firms. That’s a huge advantage when raising capital.
Put cybersecurity on your board’s agenda. It’s one of the best investments your firm will make.
Conclusion
Hackers are getting smarter. More aggressive. And industrial scale DDoS attacks are crippling financial institutions at record numbers.
Here’s your cybersecurity takeaway for alternative investment firms:
- Alternative investment firms hold valuable information that hackers want
- DDoS attacks are surging across financial services
- Cybersecurity matters to investors and can help you raise capital
- Every fund needs DDoS security and an incident response plan
- Use cybersecurity as a competitive advantage when fundraising
Use cybersecurity as your secret weapon. Those that do will protect investor assets, gain a fundraising edge, and keep hackers at bay.
Peyman Khosravani is a global blockchain and digital transformation expert with a passion for marketing, futuristic ideas, analytics insights, startup businesses, and effective communications. He has extensive experience in blockchain and DeFi projects and is committed to using technology to bring justice and fairness to society and promote freedom. Peyman has worked with international organizations to improve digital transformation strategies and data-gathering strategies that help identify customer touchpoints and sources of data that tell the story of what is happening. With his expertise in blockchain, digital transformation, marketing, analytics insights, startup businesses, and effective communications, Peyman is dedicated to helping businesses succeed in the digital age. He believes that technology can be used as a tool for positive change in the world.
