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2020 Operational Insights in Alternative Funds


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The CalALTs Best Practices Committee is pleased to release our 4th annual Best Practices White Paper, 2020 Operational Insights in Alternative Funds. In this year's addition, we discuss best practices in vendor management, a new era of outsourcing and take on compliance topics such as being prepared for a regulatory examination, GIPS 2020 and due diligence in digital assets. 


You can view some key highlights of this publication below. 



Best Practices in Vendor Management 


  • Proper vendor due diligence is best practice as any vendor you select is an extension of your firm and it is critical you align yourself and your business with reputable service providers.  
  • Due diligence can take many forms and may differ depending on the nature of the vendor and the level of risk assessed but it is important to note that proper due diligence is not simply a checklist or documentation exercise but rather a substantive exercise in mitigating the operational risks to your firm.  

Regulatory Examinations: Staying Prepared 


  • Staying prepared first requires getting prepared: consultation and documentation.
  • Examination requests are broad so the examiners understand the scope of a firm’s operations, then they test the appropriateness and application of related policies.
  • Even before COVID-19 made remote working ubiquitous, technology and information security was a hot topic with regulators.

Digital Assets 


  • The relative absence of traditional financial services intermediates has created a compelling market opportunity for some arguably less sophisticated organizations.   
  • Managers should conduct proper diligence on its service providers, develop best practices and proper risk controls to ensure they are in a position to meet institutional client and regulatory requirements. 

The Era of Outsourcing in Alternative Funds 


  • The industry evolved organically and slowly and for a variety of reasons outsourcing many functions became acceptable.  
  • A few reasons for the change are a maturing industry with fee and operationally efficiency pressure, investor acceptance, and the improvement of service providers having the expertise and ability to take on the functions. 

GIPS 2020 and Advertising and Solicitation Rule Amendments 


  • Investment advisers claiming compliance with the Global Investment Performance Standards (“GIPS”) will need to prepare GIPS reports for periods ending on or after December 31, 2020 in accordance with the new 2020 Standards. 
  • The SEC proposed amendments to the solicitation rule would potentially change the nature of the relationship between investment advisers and solicitors, and expand the current rule to apply to solicitations of private fund investors in addition to advisory “clients.” 


This paper is a product of the CalALTs Best Practices Committee whose members include:  

  • Sasha Burstein, K&L Gates, LLP - Committee Chair 
  • Joshua Barlow, Valhalla Fiduciary
  • Michelle Bergren, Camden Asset Management
  • Frank Perez, Makena Capital Management
  • Jarod Winters, Sunrise Capital Partners LLC 


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