Spy games

Some people might assume that private funds management has little in common with the Cold War. But that’s because they don’t appreciate the degree of cunning espionage and counter-espionage that goes on.

These days, GPs often employ nifty software tools that allow them to track exactly which LPs are clicking on which documents in a shared online portal – the idea being that it helps the manager to figure out whose interest is genuine, based on the materials downloaded. And with existing LPs, programs like IntraLinks and eFront allow fund managers to see which investors actually bothered to download a quarterly report that may contain some disappointing markdowns (and thus follow-up with a well-timed phone call to explain). James Bond, eat your heart out.

Better still, though, LPs have cottoned onto this and are launching their own counter-intelligence strategies. Aware that GPs are tracking them, some are telling a junior staffer to go in and download everything indiscriminately in one go. GPs may provide a bunch of user IDs to an LP, only to find that just one (that of the junior staffer) ends up being activated. Your move, fund managers.