Lake Street Update

There have been significant surprises in the financial world throughout the last few months; this includes the failure of Silicon Valley Bank (SVB) and First Republic Bank (FRB). Lake Street works proactively to avoid negative client outcomes from such surprises, and we communicated and acted quickly as these events have unfolded. 

To mitigate risk from such events, we have long advised our clients to hold cash balances in Treasury money market funds or FDIC insured deposits spread across several well capitalized institutions, both of which minimize risk of loss from rising interest rates and default. As a result, our clients (including those with cash balances well in excess of the $250k FDIC deposit insurance limit) had minimal exposure to bank failure risk. 

As these events have unfolded, we brought our team together to discuss actions to recommend to clients, as well as ensuring prompt, consistent, and measured communication to all. We have swiftly reassured clients that they are well served and insulated from direct exposure risk. 

In the days and weeks following the SVB failure, and the subsequent FRB takeover, we executed on a number of items for our client base to continue to minimize risk and improve our clients' overall risk/return profile within their financial lives. This includes, but is not limited to:

• Transferring cash out of deposit accounts where balances exceed the FDIC limit
• Switching to a different solution for checking account needs, such as Fidelity or Schwab, for clients with SVB/FRB accounts (and others with uninsured deposit risk)
• Turning off margin on brokerage accounts that don’t need it to reduce illiquidity risk in the event of a brokerage firm failure
• Turning off any standing instructions for recurring cash transfers to SVB/FRB accounts
• Changing fund distribution instructions away from SVB/FRB
• Stop processing capital calls to SVB/FRB accounts until discussing with investment fund managers
• Continuing the dialogue with our investment funds which may have exposure to SVB/FRB via fund accounts or portfolio company accounts

Times like these test how firms like ours are prepared for unexpected challenges, and how they act in the face of adversity. I am extremely proud of how well our team was able to problem solve under pressure and act swiftly and efficiently to take care of our clients. 

Sincerely,

Joe Chase

Managing Partner

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