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Blog – Applied Fund Solutions - Pag 2

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02Mar

A Practical Guide On Fund Structuring And Fund Launch Management

Guide on Fund Structiuring & Fund Launch Management
By Daniel Nikci

Nowadays, business organizations are growing daily in every part of the world, creating more technological emergence of the uprising and vibrant companies as those seen in the legendary city of Byblos and countries like China. One unique thing about having an influx of entrepreneurs is that it attracts investors to finance these business owners.

Even though most business owners grow from scratch by utilizing their own capital, others advance through assisted revenues and business credits. The assisted percentage of start-up entrepreneurs uses the financial help of external monetary awards by investors who are interested in the growth of the business. Here are the basic things you should know about fund structuring and fund launch management.

What is Fund Structuring?

Fund Structuring

Fund structuring talks about funds that combine fixed-income and equity products, such that it provides entrepreneurs with investors offering them both monetary rewards and capital protection. The revenue appreciations are given to entrepreneurs if investors find their products attractive, as they stand a chance of asking a business owner for preservative investments alongside a downward tendency to protect them and offer an upward tendency to grow the market.

A greater part of the sum of investment is determined by fund structuring. For instance, in a scenario where S and P fund structuring beshield 80% of the invested amount, this would mean that it will channel about 80% of capital into the fixed-revenue products, which has little or no opportunity of falling lower than the amount invested from the beginning.

What Are the Current Sources of Equity Fundings For Startups?

Equity Fundings

1. State, Country, and Regional Equity Fundings: This is a kind of funding that provides money through government funds as income into businesses that will enjoy the advantages, that in turn favor the local market management resources through the creation of jobs and other meaningful opportunities.

2. Social Influence Equity Fundings: Startups of organizations and companies intending to give rise to significant returns for welfare benefits or outcomes with financial gains can benefit from this platform as they are able to get monetary assistance.

3. Corporate Fundings: Businesses that are manufacturing technologies or products that specifically match the future or current purpose of a corporate body can get monetary assistance from corporate fundings.

4. University Fundings: This technological platform provides revenue appreciation to companies that came into existence through a group of university members, including students, professors, and alumni. In most cases, this funding technology developed at the time when the founders were still running the university.

5. Seed Equity Fundings: If beginner companies cannot fund their business unaided, they can benefit from seed equity fundings. Seed funds are commonly strategized by a working group of investors, as a means to put more capital into other enterprises, to have more gains.

6. Accelerator Fundings: This is a kind of equity funding that provides co-working space, mentoring, interaction platforms, and gravitational investment resources, to help in elevating companies that are still growing.

What Questions Should Fund Managers Consider Before Taking a Risk?

1. What are the main factors to take seriously when strategizing fund investment conducts and policies?

2. In what ways can you apply in collecting the capital needed for your business fund?

3. What are the challenges you might face as experienced managers of funds?

4. Which fund will you create from an accounting and legal point of view?

5. What kinds of expertise are needed for better funding in a management team?

6. What economic strategy can you use in operating a fund?

What is the right way for experienced managers to account for funding results and activities when funding business trustees including limited partners and investors?

It might seem rewarding and interesting to run a business fund at an early stage or startup level. However, the effort and time it takes to create and maintain an investment fund is immense. Since most startup companies have investments with a daring long life phase of up to about 10 years or more, before any outcome of investors, experienced managers of funds must agree to offer their effort and time for nearly a decade.

What Is the Place of Private Equity in Fund Structuring and Management?

Private equity is a type of investment for enabling provisions by wealthy individuals or groups as well as some high-profile institution owners. The funds go directly to businesses to allow smooth investments in private sectors or for purchasing businesses that are no longer on the list, especially those from non-private stock exchanges. Including private equity funds can work in different ways such as: real estate, venture funding, distressed capital, and funds of funds.

Why Do Businesses Seek Private Equity Funds?

Whether you are a newbie in business or you have been around for a while, there are many reasons why private equity might seem appealing and helpful to your business. Here are some of the reasons:

1. In terms of the net monetary value of your company, private equity is a long-term style of investment that can set both business operators and their founders free from the unnecessary stress of a thrice-a-year review.

2. Commonly, the turnover rates will be lesser and extend across a more lengthy period, especially when in comparison with other types of investment.

3. Businesses can function without steady monitoring from public markets because of private funds.

4. Any business including private equity funds often comes with proprietary or ownership insights. It also brings market funds that investors of different companies can plan and leverage.

5. You can utilize growing funds in acquisitions, for operation kickoffs, improved head counts, and for exploring current markets.

Conclusion

When funding is based on structuring and management, most entrepreneurs fear that investors will hardly notice their business and willingly opt to commit at a starting point. However, this might not always be the case, as it is all about creating the current funding for your business to grow.

When managing a working fund, ensure that you understand all the practices that you can run with, which should also align with fund management. Your main focus as a startup should be directed at using the right strategies to attain meaningful success, and you should stick to that.

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25Mar

Thomson Reuters: Compliance checklist for operating during a pandemic

By Daniel Nikci

Our very own Dan Nikci contributed to this Thomson Reuters article, a timely piece indeed.

As the global COVID-19 pandemic spreads, compliance and risk departments at financial services firms have been on high alert and working overtime as firms switched on business continuity plans, closed offices and sent employees home to work.

Establishing and maintaining continuity plans is a normal part of the compliance and risk function. Review of BCPs is also a standard part of exams by regulators. The fact that virtually every firm has now had to enact at least some parts of their BCP, it is logical that regulators will ask how things went in the next exam cycle.

Below, we provide a checklist for compliance and risk professionals regarding the altered work landscape for employees as a result of the pandemic. The list is broken into two parts: items that require attention at all firms, and a section with links of useful resources.

Checklist for businesses

  • Business continuity strategies must be sufficiently flexible to address a wide range of possible scenarios, including pandemics – even long-duration, multi-national ones.
  • They should spell out remote access solutions, emergency procedures that outline how to recover data and equipment, reach employees and security specialists, protect the integrity of the physical workspaces the business owns. The back-up systems must be well-established and responsibilities over providing access must be clear. A point person should be routing inquiries and sending updates to top executives and the board of directors.
  • Consider whether and how vendors can fulfill their obligations. Speak with counsel about how contract terms can be altered and emergency provisions triggered. Force majeure or unforeseeable circumstances clauses are not as straightforward as one might think, and there can be a high hurdle in meeting unique ones.
  • Remind employees of the heightened cybersecurity risk of working remotely, specifically phishing and ransomware attacks. Remote workers must also be reminded of the necessity to safeguard customer records and privacy information. Consider prohibiting the printing of any business documents at home.
  • Archiving communications between staff and clients is perhaps one of the most common work-from-home pitfalls. Reminding and training remote workers of this essential task along with other safeguard measures is vital.
  • Firms should anticipate additional burdens on IT Help Desks as more individuals work remotely and experience technology problems. Firms should be sure all help desks are adequately trained and staffed to handle increased volumes.
  • Compliance and risk departments should also coordinate a review and testing with technology departments. The compliance team and the tech department should test the company’s remote VPN capacity and measure connection speeds.
  • Firms should also redistribute all relevant company policies related to the use of personal computers, smartphones, tablets, and WiFi networks and remind staff that the policies still apply to those working from home, and security protocols will not be relaxed.
  • Remote work requires training personnel to be able to spot fraudulent behavior and report it promptly; phishing scams can increase during emergency periods like pandemics.
  • The creation of a pandemic task force or committee is valuable to coordinate information from various business lines, and departments including; IT, human resources, compliance, risk, operations, facilities, and communications.
  • Compliance and HR departments should also be careful to protect personal medical information under applicable health privacy regulations such as Health Insurance Portability and Accountability Act (HIPPA) if employees become infected or ill. Despite a perceived need to share such information, it is imperative to maintain individual employee health privacy, and counsel should be consulted on when and how disclosures can be made.
  • Compliance, risk, and senior management must take inventory of essential employees and determine how many and which personnel are needed onsite at various locations and consider backup personnel as well under various business disaster or disruption scenarios. Contact information for all personnel, especially key employees, should be updated.
  • Regulatory filing deadline relief for disclosures and registrations can be made us of. Firms must summarize why the relief is needed. Impediments should be listed with specificity, like disruptions to transportation, limited access to facilities and support staff, etc. Include the virus as a source of uncertainty in any management discussion and analysis.
  • If no-action relief is sought from the regulator, explain why the relief is needed as a commonsense or ethical solution, even if not technically permitted.
  • For corporate board meetings, a change of meeting time, date and communication medium should be noted in the proxy statement, if there is still time.
  • Protecting data at all costs is essential. Cybercriminals might use this pandemic as a means of scamming customers and compromising data. Keep clients, regulators and the workforce informed on cybersecurity solutions for computers, networks and your encrypted connectivity. Enforce policies regarding personal computers and phones and what data can be accessed by whom.
  • Tell customers what is being done behind the scenes to be able to provide continuing service, and what delays they might experience.
  • Review the business’s insurance coverage. Business interruption and supply-chain coverage, including contingent business interruption, will typically require a showing of property damage that gave rise to the loss. They typically offer very limited coverage for pandemic diseases, due to exclusions and sub-limited coverage.
  • Ideally, members of the emergency response organization have received training on performing their duties and on testing the BCP’s effectiveness with relevant courses and emergency exercises before a pandemic or other emergency strikes. But don’t feel it’s too late now: Start the training as soon as possible, and remember the responses to this pandemic need to change with it and with legal authorities’ directives.

Industry professionals weigh in

“My business has a significant present in Puerto Rico, and dealing with Hurricane Maria really forced us to refine our business continuity and emergency preparedness,” said John Vaccaro, CEO of MassMutual Financial Advisors in Springfield, MA. “Thanks to being battle-tested, we feel like we have the right processes in place to deal with the investments our clients worry about, and the right technology in place to contend with remote working.”

Vaccaro advises other firms to use a variety of communication methods to make sure you reach those employees possessing different familiarity and comfort levels with a range of tech tools. He also encourages businesses to reach out to their federal and state regulators, as he has found them to be receptive and informative during this considerably uncertain time.

“My biggest concern is technology and trading, because as markets break down, volume spikes and liquidity shrinks and I want to be confident I can manage portfolios and positions without interruption,” said Eric Sams, president at E&E Financial Services, Inc. in San Diego.

“And I want to ensure the financial viability of my broker-dealer/registered investment advisory firm, so I make sure we have sufficient capital to weather the storm. Finally, I must communicate with clients, keeping them informed and being transparent, but without “ausing them to panic,” he said.

“At AFS, each of us has a mi-fi (mobile hotspot) device so we have a back-up internet connection if our main lines go down or if we need to spread the surge in bandwidth to additional lines,” added Daniel Nikci, founder and managing partner at Applied Fund Solutions, LLC in New York. “We also are a paperless firm, which is coming in handy as we all work remotely.”

Additional resources

The Securities Industry and Financial Markets Association (SIFMA) trade group has a web page with links to an operational resiliency podcast, and numerous resources related to industry guidance, BCPs and COVID-19.

The SEC issued a coronavirus directive calling for transparency on the part of firms in disclosing material risks and operational concerns to investors, adding that it would ease regulatory burdens modestly and “consider additional relief from other regulatory requirements” if needed.

The bank regulators have a coronavirus disease 2019 portal of announcements and information for regulated businesses. “Regulators note that financial institutions should work constructively with borrowers and other customers in affected communities,” said one statement. “Prudent efforts that are consistent with safe and sound lending practices should not be subject to examiner criticism.”

The Financial Industry Regulatory Authority (FINRA) released a regulatory notice advising brokers to review their business continuity plans and consider their preparations for such pandemic situations.

FINRA has provided a Small Firm Business Continuity Plan Template as an optional tool to aid small firms. Another valuable resource can be found in items 16 and 18 in the FINRA Business Continuity Planning FAQs, which discuss a firm’s preparation and testing efforts, particularly related to pandemics.

There is an annual requirement to review BCPs under FINRA Rule 4370, saying such plans should address the critical areas all noted above – from data backup and recovery, to communications with customers and regulators, to customer access to funds.

FINRA Regulatory Notice 09-59 was released in 2009 as a result of the outbreak of influenza A (H1N1) or swine flu, and it continues to help firms understand the risk-mitigating actions and appropriate measures to prepare for the effects of a pandemic.

To keep up-dated on the latest news and information regarding the COVID-19 pandemic, the economic impact, and the government’s response, at Thomson Reuters’ COVID-19 Resource Center, and you can follow Reuters.com or the Reuters App.

Please click here to download TR Regulatory Intelligence article compliance checklist
https://blogs.thomsonreuters.com/answerson/practice-note-compliance-checklist-for-operating-during-a-pandemic/

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15Oct

Top Reasons Why Hedge Funds Should Implement ESG

By Daniel Nikci

1. ESG data availability is increasing and managers are starting to use it alongside traditionally financial metrics as an alpha signal or risk mitigator.

2. Hedge funds are behind the curve relative to other asset classes and are already facing questions from clients and consultants on why they are not incorporating ESG into process and reporting.

3. In Europe, having a robust ESG process is already a prerequisite by some of the largest institutional clients, in order to be considered for new client mandates. US clients are catching up and asking more questions.

4. Major investment consulting firms are already evaluating and rating managers on ESG incorporation in addition to traditional buy ratings.

5. HF who have a robust ESG approach will benefit and stand out among competitors, but it will require them to build an ecosystem in every step of the process, from investment analysis, to portfolio construction and finally client reporting.

6. Demonstrating ESG portfolio characteristics to clients via standard reporting will become a standard requirement and practice – but early movers will have an edge and AFS can help them deliver.

Applied Fund Solutions is a key partner to clients exploring ESG integration!

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