Progress report
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17/08/2011
Comment: Christopher Miller
Hedge funds can be forgiven for being quietly smug about the phone hacking and corruption stories dominating the headlines on both sides of the Atlantic. Now the press has lined up in a circular firing squad, hedge funds are out of the limelight. But there are lessons to be learned now we know how vulnerable we are to having our phones or emails hacked.
For every obsessively paranoid hedge fund manager, there are just as many who can’t be bothered with security, and rationalise it by saying that no one will be interested: security by obscurity is the best course of action. Well, here are a few reasons why that needs to be re-thought.
Industrial spying does happen, and I have even heard rumours of a spying department in a large hedge fund. I have personally been asked to perform covert due diligence on hedge funds by unidentified people who I strongly suspected were not investors. Obviously, I declined.
Security by obscurity is useful, but can be negated by the fact that all hedge funds are potential targets for deluded activists with time on their hands. The risk is exacerbated because even if there are layers of protection to prevent serious disruption, being publicly hacked looks bad to investors. So here are a few things you can do.
The most important thing to remember is that senior people are usually the worst offenders because they know they can get away with it, and many of them aren’t good with detail or being told what to do by people in IT. So any drive for better security needs to start with practising what is preached. It doesn’t hurt to complain to the rank and file that “even I have to do this now!”
Use different strong passwords for everything, and avoid sharing them. This counts for external services and accounts as much as internal accounts. You can use a password manager like LastPass or
KeePass to help you manage them. You’ll still need very strong master passwords, and for that you can turn a phrase into a password, or use PasswordGear to memorise passwords. It’s an
App for the iPhone that I created myself, and uses mnemonics to make random passwords memorable, but it can also be used to remember things like obscure Bloomberg codes.
While it is a good idea to write down passwords and keep them in a safe place, it is not clever to store them anywhere near the computer, like on a post-it on the screen, or under the keyboard.
Neither is it clever to glue the security token to your laptop in defiance of the security police.
Make sure that all computers, whether portable or fixed, have boot level encryption. At the time of writing, the free Truecrypt is actually more secure than Microsoft’s Bitlocker. It’s really easy to use, and a good defence at a time when having a laptop with customer data on it stolen is quite serious.
Stamp down on circumvention of corporate systems with personal accounts. There’s no valid reason for using personal accounts. Usually, it is either laziness or dishonesty.
Make sure that all voicemail access codes are strong. I’m not just talking about mobile phones, but landline phones, which might be accessible from outside using a default code.
Ensure that all sensitive data flow is encrypted. Often the simplest way of doing that is to encrypt emails, PDF, Excel or Word files.
While you may complain that the above advice doesn’t go far enough, the most important part of security is making a policy that people read, understand and co-operate with. An unrealistic 200-page procedures manual will only be used after the disaster to sack people you were going to sack anyway. So here’s my small attempt to make passwords more human and usable: www.passwordgear.com/video-demo.
Christopher Miller is CEO of Investment Quotient, a financial research consultancy
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60 seconds with... Kenneth Turchin
CAN YOU DESCRIBE YOUR CURRENT ROLE?
I have worked in public accounting and hedge funds and in the past eight years have been selling middle- and back-office services to the alternate investment industry. My role is to build relationships with clients, teach them about SS&C’s products and services, and ensure seamless transactions every time the firm launches a new fund.
IF YOU WERE DOWN TO YOUR LAST £1,000, HOW WOULD YOU INVEST IT?
I would buy THREE shares in Apple and hope for a repeat 383% return in the next five years.
WHAT WOULD YOU DO IF YOU WERE IN PRESIDENT OBAMA’S SHOES?
That’s one pair of size 12 shoes I do not want to be in!
WHO WOULD PLAY YOU IF THEY MADE A MOVIE ABOUT YOUR FIRM?
Kevin Bacon. He is a versatile actor and the centre of the entertainment universe. I am in sales. Everyone in the industry would be linked to me in six steps or less. My client list would be ridiculous.
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