Most investment management software does little to help sponsors keep their investors’ information private. This is due to a combination of legal requirements and the platform’s technology capabilities.
As a sponsor, you should never have to worry about your investor information getting utilized in ways that you did not intend it to. That’s why our team at Avestor has made investor privacy a top focus as we’ve designed our customizable funds.
Common Threats to Information Security
Typically with syndications, there are three major areas in the process where your investor information could leak:
1. Subscription Documents: These documents must be signed by all investors. So, anyone who gets a copy of these signed documents can see all confidential information associated with your investors including their email addresses, phone numbers and physical addresses. This allows them to directly communicate with your investors.
2. Project Communications: In many co-GP models, while there is a verbal agreement that each GP will communicate with their own investors, this is not guaranteed. There may be communication happening directly to your investors without you even realizing it. The only way you find out is if one of your investors tells you.
3. Tax Preparation: To file taxes for a syndication, the primary sponsor must merge the complete investor list. Because of this, anyone who has access to the tax returns will be able to see the names, addresses, and all other contact information about your investors.
With these security gaps, there’s always a chance that your confidential investor information can end up not being so confidential and you lose control of your investor relationships.
Protect Your Investor Information With a Customizable Fund
When you invest in a customizable fund, on the other hand, you can have full confidence that your investors information is secure for three primary reasons:
1. Consolidated Capital: When you invest in a customizable fund, your investors capital is pooled together and then invested into the deal through the Fund LLC. In this way, the sponsor of the deal has no information on the underlying investors that are participating. Your investor information is fully protected.
2. Limited Communications: Since the deal sponsor has only the information of fund LLC, all communications about the project must go to the fund manager. This prevents any direct communication from a deal sponsor to your investors.
3. A Single K-1: When tax season rolls around, your fund is issued a single K-1. No one, not even the tax preparer for the deal, gets access to your investors names or contact information. This keeps your investor list completely confidential.
If you’re interested in learning more about keeping your investor information safe and private, contact us today to learn more about the customizable fund model.