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T Rowe Price to acquire alternative credit manager Oak Hill Advisors in USD4.2bn deal
T Rowe Price Group is to acquire alternative credit manager purchase Oak Hill Advisors and certain other entities that have common ownership for a purchase price of up to approximately USD4.2 billion.
USD3.3 billion is payable at closing, approximately 74 per cent in cash and 26 per cent in T Rowe Price common stock, and up to an additional USD900 million in cash upon the achievement of certain business milestones beginning in 2025.
The purchase price includes the retirement of OHA debt outstanding at closing. Excluding amortisation of intangibles and the expense impact of the earn-out, the transaction is expected to be accretive to T. Rowe Price diluted earnings per share by a low-to-mid single digit percentage in 2022.
OHA, a leading alternative credit manager, will become T Rowe Price’s private markets platform, accelerating T Rowe Price’s expansion into alternative investment markets and complementing T. Rowe Price’s existing global platform and ongoing strategic investments in its core investments and distribution capabilities. Alternative credit strategies continue to be in demand from institutional and retail investors across the globe seeking attractive yields and risk-adjusted returns.
With USD53 billion of capital under management as of 31 July, 2021, across its private, distressed, special situations, liquid, structured credit, and real asset strategies and more than 300 employees in its global offices, OHA has generated attractive risk-adjusted returns over its more than 30-year history. OHA’s performance, its global institutional client base, and the positive industry backdrop have positioned it to raise USD19.4 billion of capital since January 2020.
Bill Stromberg, chair of T. Rowe Price’s Board of Directors and chief executive officer, says: "While we are committed to our long-term strategy to grow our business organically, we have also taken a deliberate and thoughtful approach to considering adding new capabilities through acquisitions that advance our business strategy. OHA meets the high bar we have set for inorganic opportunities, and their proven private credit expertise will help us meet our clients’ demand for alternative credit.”
Rob Sharps, T Rowe Price president, head of Investments, and group chief investment officer, adds: “OHA and T Rowe Price share organisational cultures that focus on long-term investment excellence and delivering value for clients and that are grounded in collaboration, trust, and integrity. As we bring together complementary capabilities and distribution, we can capitalise on growth opportunities for new product development that add value for our clients and stockholders. We share a vision with OHA’s seasoned management team to build a broader business in private markets by combining their specialty in alternative credit with our global scale.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Deals & Transactions Acquisitions Finance & InsuranceDimensional appoints Head of Responsible Investing
Dimensional Fund Advisors has appointed Jim Whittington as Head of Responsible Investment.
Joe Chi, who will retire at the end of the year. Additionally, the firm named Lacey Huebel as Head of Responsible Investment, North America. Both appointments are effective 1 November.
Whittington brings valuable experience to the role, having served as a Senior Portfolio Manager and Vice President in the firm’s London Office, in addition to his work as a member of Dimensional’s Investment Stewardship Committee. For years, he has been on the front lines of Dimensional’s Environmental, Social, and Governance (ESG) initiatives in Europe, the Middle East, and Africa, working with clients, managing portfolios, and representing the firm with industry organisations.
Like Whittington, Huebel brings a wealth of knowledge to her new role, having managed the firm’s social and sustainable fixed income portfolios since their inception. She frequently represents Dimensional on ESG matters both with clients and at conferences. In addition to her new role, Huebel will continue to serve as Portfolio Manager and Vice President.
“These appointments will further our decades-long commitment to sustainability,” says Gerard O’Reilly, Co-CEO and Chief Investment Officer of Dimensional Fund Advisors. “For nearly 20 years, we have managed robust commingled ESG investment solutions on behalf of clients. During that time, informed by the work of leading academics and climate scientists, we conducted extensive research into ESG considerations, developed a reliable approach to analysing and integrating ESG data, built innovative strategies that take environmental and social considerations into account, and designed a systematic approach that enables effective stewardship activities for portfolios that hold thousands of companies. More recently, Dimensional was among the first in its industry to have its worldwide operations certified Climate Neutral by leading climate solutions provider South Pole. We are confident that Jim and Lacey will build on the strong foundation Joe helped establish here.”
Prior to joining Dimensional, Whittington served in a series of leadership roles in London and Hong Kong with various financial firms. He received a BA with honours from the University of Oxford and an MBA from China Europe International Business School.
Huebel previously worked on Dimensional's Investment Analytics and Data team managing fixed income reporting. She has two master’s degrees—an MS from Kansas State University and an MA from the University of California, Santa Barbara. She earned her BS from Texas State University, San Marcos.
Like this article? Sign up to our free newsletter Author Profile Related Topics ESG & Responsible Investing Moves & AppointmentsVIA AM supports Katingan Mentaya carbon offset project via carbon neutral share class offering
VIA AM, a Paris-based asset manager specialised in systematic investment strategies, is supporting the Katingan Mentaya Project through the recently launched VIA Smart-Equity Europe Fund’s Carbon Neutral share classes.
The objective of these share classes is to compensate for greenhouse emissions associated with companies held in the portfolio, through carbon offsetting projects.
The Katingan Mentaya Project aims to protect and restore 157,875 hectares of peatland ecosystems on the island of Borneo in Indonesia, provide local communities with sustainable sources of income and ultimately fight against global climate change. This is the world’s largest emission reduction forest project of its kind, avoiding around eight million tons of carbon dioxide (CO2) being released in the atmosphere per year, equivalent to taking 2,000,000 cars off the road.
Peat swamp forests are incredibly carbon-rich and, by preventing the conversion of natural forests to plantations, the project avoids the emission of nearly half a billion tones of CO2 in the atmosphere. The area protected is also rich in biodiversity, home to more than 4,000 orangutans alongside twelve other endangered species.
Another key aspect of the project is financing sustainable development and agricultural projects in the 34 villages surrounding the project area, with hundreds of people receiving training as part of the project’s activities, as well as improved access to education.
VIA AM is committed to neutralising greenhouse emissions of its portfolio holdings and delivering related benefits against wider Environmental, Social and Governance (ESG) criteria, such as the funding of projects fighting against poverty or preserving biodiversity. The compensation effort is shared: the investor pays slightly increased management fees (+ 0.05 per cent), while VIA AM reduces its margin by an amount at least equivalent to this.
The Katingan Mentaya Project has been selected in partnership with Judo Cares, an independent specialist, advising VIA AM on choosing the best carbon offsetting programmes.
Laurent Pla, Co-Founder of VIA AM and Fund Manager, says: “While we remain focused on maximising long-term returns for our investors, we understand how active management can have a positive impact on combating climate change challenges. Together with our partners at Judo Cares, we have selected the Katingan Mentaya carbon offset project, not only for its effective carbon neutral approach, but also for its commitment towards preserving biodiversity and supporting local communities.”
William Blair Investment Management adds Absolute Return Currency Fund to SICAV range
William Blair Investment Management (WBIM) has launched an Absolute Return Currency SICAV strategy, which maintains long and short exposures across a broad universe of currencies with a view to profit from FX movements.
Employing an actively managed approach, the Absolute Return Currency Fund will include exposures to more than 30 currencies from developed and developing economies.
The portfolio will be managed by WBIM’s Dynamic Allocation Strategies (DAS) team, overseen by Brian Singer, CFA, Partner, Portfolio Manager and Head of the DAS team, and Thomas Clarke, Partner and Portfolio Manager.
The Fund aims to act as a diversifying complement to traditional and alternative portfolios, with a return profile expected to be uncorrelated to equity and bond markets over the longer-term. The team adopts a top-down fundamental investment approach, focusing on expected changes in exchange rates and an assessment of currency valuations, aiming to exploit value to price discrepancies while seeking an attractive return/risk profile.
The Absolute Return Currency SICAV is the thirteenth William Blair strategy to be launched for global investors and the second managed by the DAS team (Dynamic Diversified Allocation). As of 30 September 2021, the company manages USD4.28 billion of assets within its SICAV across Emerging Markets Growth, Emerging Markets Leaders, Emerging Markets Small Cap Growth, Emerging Markets Debt Hard Currency, Emerging Markets Debt Local Currency, Dynamic Diversified Allocation, China A-Shares Growth, Global Leaders Sustainability, Global Leaders, US Small-Mid Cap Growth, US Small-Mid Cap Core, and US All Cap Growth SICAV vehicles.
Brian Singer, CFA, Partner, Portfolio Manager, and Head of William Blair’s Dynamic Allocation Strategies (DAS) Team, says: “The Absolute Return Currency strategy seeks to provide investors with the potential to benefit from positive returns over a market cycle that are expected to be uncorrelated to equities and bonds, complementing traditional portfolio allocations through an absolute return approach. We believe active currency capabilities can improve portfolio efficiency through return enhancement and risk mitigation.”
Thomas Clarke, Partner & Portfolio Manager, Dynamic Allocation Strategies (DAS) Team, adds: “The Absolute Return Currency strategy builds on our team’s multi-decade approach to active currency management. While it has been our experience that our currency management has delivered consistent performance in a variety of environments over that time, we believe the current environment of low yields and many equity segments appearing fully valued make a diversified approach like the one embodied within Absolute Return Currency especially attractive.”
Horizon appoints Senior Business Development Manager for EMEA region
Horizon Software (Horizon), a SaaS provider of electronic trading solutions and algorithmic technology, has appointed Stéphane Sebah as Senior Business Development Manager, as part of its growing EMEA sales team.
Sebah brings with him over eighteen years of solid experience in the financial sector and will be tasked with addressing the markets’ challenges efficiently by accelerating the business growth of Horizon software in the region.
Horizon has witnessed a rapid growth in the EMEA region, which is an important development goal for Horizon moving forward. Having previously worked as a sales broker in the European indices for 10 years at various financial institutions, including Square Global Markets and GFI Securities Limited, Stephane’s experience will enable him to bolster the EMEA sales team and provide insightful management as the business continues to grow. With a firm reputation, alongside a growing global client list, Horizon is striving to offer the best service and improve its business strategies.
Sebah says: “I am extremely pleased to be joining Horizon’s team. Horizon’s reputation in providing world class trading solutions reflects the dedication of the staff in offering the best service and support to the clients. Now that Horizon is witnessing an increasing demand for agency trading, I am proud to be part of this journey and I look forward to the challenges and responsibilities that my new position offers”.
Guillaume Poitevin, Global Head of Sales and Marketing at Horizon Software, adds: “We are delighted to welcome Stéphane into our team. This appointment has a significant importance to Horizon, and it brings us one step closer to our goal of building a strong and dedicated sales team with a clear focus on developing our business strategies in EMEA. This is particularly significant now, as we expand towards agency trading. Stephane’s background in brokerage will add a great value to our team and customers.”
SBAI publishes toolkit for implementation of ESG in different alternative asset classes
The SBAI, a global alliance of alternative investment managers and allocators and custodian of the Alternative Investments Standards, has released the next instalment of its work on Responsible Investment.
A toolkit for asset managers and allocators on the practical implementation of responsible investment in different alternative investment strategies and asset classes. Four strategy specific publications can be found in their Responsible Investment Toolbox.
Much of the guidance provided for implementation of responsible investment is geared towards long only equity portfolios. Whilst there are some elements that are transferable to other alternative asset classes, there are many additional considerations dependent on factors such as asset class, instrument, portfolio concentration, and average holding periods. The toolkit explores these issues along with data considerations in equity long/short, credit, macro, and systematic strategies.
Bradley Belt, Vice Chairman of Orchard Global Asset Management, says: “The SBAI’s work on Responsible Investment is a valuable contribution to the ongoing discussions on integration of ESG risk factors into investment decision-making. In highlighting the need for different approaches, it makes an important distinction between rigorous investment processes which account for any financially material risks, including ESG risks, and pursuing investment strategies with dedicated ESG objectives. This latest SBAI guidance enhances asset manager and allocator understanding of the ESG issues that are relevant to both the strategy and the asset classes traded.”
SBAI’s Responsible Investment work aims to help educate managers and institutional investors around the nuances of ESG and Responsible Investment both when integrating financially material ESG risk into investment and risk management processes, and when running dedicated products with specific ESG objectives.
Maria Long, Research and Content Director of the SBAI, says: “Our mission is to solve for better and improve industry outcomes. Our Working Group discussions have highlighted the importance of allocators and asset managers being able to have conversations that take into account the nuances of different alternative investment strategies. Through collaboration with our community of asset managers and allocators, this toolkit provides guidance on implementing robust and thoughtful frameworks and provides key topics for discussions between asset managers and investors to ensure any ESG objectives are aligned.”
Like this article? Sign up to our free newsletter Author Profile Related Topics ESG & Responsible InvestingAlign's Vinod Paul accepted into Forbes Technology Council
Vinod Paul, Chief Operating Officer at Align, the global provider of technology infrastructure solutions, has been accepted into Forbes Technology Council, an invitation-only community for world-class CIOs, CTOs and technology executives.
Paul was vetted and selected by a review committee based on the depth and diversity of his experience. Criteria for acceptance include a track record of successfully impacting business growth metrics, as well as personal and professional achievements and honours.
“We are honored to welcome Vinod into the community,” says Scott Gerber, founder of Forbes Councils, the collective that includes Forbes Technology Council. “Our mission with Forbes Councils is to bring together proven leaders from every industry, creating a curated, social capital-driven network that helps every member grow professionally and make an even greater impact on the business world.”
As an accepted member of the Council, Paul has access to a variety of exclusive opportunities designed to help him reach peak professional influence. He will connect and collaborate with other respected local leaders in a private forum. Paul will also be invited to work with a professional editorial team to share his expert insights in original business articles on Forbes.com, and to contribute to published Q&A panels alongside other experts.
“It is a tremendous opportunity to join the esteemed technology leaders in the Forbes Technology Council,” Paul comments. “Align’s approach to Managed Services has kept us at the forefront of technology providers in the alternative investment market. The Forbes platform will continue to allow us to address all of the technological, cybersecurity, governance and compliance needs across the financial services and alternative investment management industry and beyond.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Moves & AppointmentsCrestbridge appoints Chief People Officer
Crestbridge has appointed Mike Edward as Chief People Officer.
In his role, Edward will be responsible for the implementation of strategic and practical plans to support Crestbridge’s international growth objectives in order to meet evolving compliance, regulatory and legislative obligations across each of Crestbridge’s eight jurisdictions.
With a career in human resources spanning more than two decades, Edward has particular expertise in devising strategies and techniques to support change and culture management and he originally joined Crestbridge on a consultancy basis, with a remit to manage a series of major HR projects. Prior to joining Crestbridge Mike worked in a number of high-profile banking and financial institutions including six years at a major European-headquartered bank, based in both London and New York, and twelve years at a leading asset management firm in Jersey.
Edward takes over the role from Fiona St Clair-Bolam, who is retiring after a career spanning almost 30 years in human resources. Since joining Crestbridge eight years ago, Fiona has been instrumental in creating and building a people-focussed culture to support the strategy and growth of the business, which now has a headcount of more than 475 people spread over eight locations across the globe. She leaves Crestbridge at the end of the year.
Crestbridge CEO Dean Hodcroft, says: “At Crestbridge our people are the heart of our business and a vital element in achieving our strategic growth ambitions. I’m delighted with Mike’s appointment to the role, where his significant industry experience will be invaluable in leading our HR strategy and helping us drive our evolving Crestbridge vision, building upon the people-focussed culture that Fiona has expertly embedded over the years. Fiona has been a key member of the senior leadership team and has been pivotal in our success to this point and I’d like to thank her for her invaluable contribution, input and counsel.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Moves & AppointmentsValue-focused US long/short manager Invenomic launches UCITS strategy
Boston-headquartered Invenomic Capital Management has launched a new UCITS version of its US-focused long/short equities strategy.
The Invenomic US Equity Long/Short UCITS Fund rolled out last month on fund structuring and governance service provider Waystone’s MontLake UCITS Platform ICAV.
The strategy launched with USD35 million in assets, with a steady pipeline ramping up to USD100 million.
The strategy, which replicates Invenomic’s existing offshore fund, invests in a diverse range of market caps in US equities, trading long and short with a fundamental approach to stock-picking and a strong value bias, using quantitative analysis.
Established in 2015 by Ali Motamed, Invenomic’s investment approach is built around trading “fundamentally sound” companies, disciplined short selling, and diversification, described by the firm as an “essential risk management tool.”
The strategy, which aims to outperform US stock markets over a market cycle with less volatility and drawdown, has generated gains of more than 17 per cent since inception, outperforming its S&P 1500 Index benchmark.
“We have been running our strategy with daily liquidity in the US for over four years now and feel that a UCITS fund available to non-US investors is a crucial next step in the development of our business,” Invenomic founder, managing partner and portfolio manager Motamed said of the European launch.
Before founding Invenomic, Motamed was co-portfolio manager of the Boston Partners Long/Short Equity Fund.
Kenneth Sim, global head of distribution at Waystone, said: “Following a decade of clear outperformance of growth over value, we have seen a clear shift in demand from investors looking for value-tilted strategies that can generate absolute returns through alpha.”
Sim added: “In response to this, the Waystone Investment Solutions team has sourced and partnered with Invenomic Capital Management LP to bring its strong track record and expertise to the European UCITS market, which has come at a time where such value-related strategies are starting to experience their long overdue tailwinds.”
Like this article? Sign up to our free newsletter Author Profile Hugh Leask Employee title Editor, Hedgeweek Twitter Linkedin Related Topics Long-short investing North America Markets Investing in Hedge FundsHedge funds split over ESG ahead of COP26 climate summit
As the 2021 UN Climate Change Conference (COP26) begins in Glasgow this weekend, hedge fund managers remain evenly split over the incorporation of ESG (environmental, social and governance) factors and sustainability metrics into their investment processes, according to a new poll.
Just over half – 53 per cent – of fund managers surveyed by Hedge Fund Research said they incorporate ESG factors or risks into their investment process – a total of 687 managers – while 47 per cent, or 609 fund managers, said they did not.
Over the course of 2020 and 2021, HFR quizzed hedge fund managers in their database on the incorporation of ESG into their investment processes.
Ahead of the COP26 summit in Scotland – which is seen as a pivotal moment in the fight against climate change – HFR’s survey found that three-quarters of funds engage with their portfolio companies on ESG issues, while 25 per cent did not.
Meanwhile, 77 per cent of funds interview said they consider climate change in their investment processes, while 23 per cent did not.
As impact investing and sustainability themes have come into sharp focus over the past decade, ESG investment factors have gained greater prominence within the global asset management industry, with allocators placing ever-greater scrutiny on how their portfolios and investments meet the climate challenge.
A wide-ranging study by Deutsche Bank last year found that ESG factors now shape the allocation decisions of roughly two-thirds of hedge fund investors.
A number of high-profile hedge fund firms – including Sir Chris Hohn’s TCI Fund, Caxton Associates, and Man Group – have emerged as vocal ESG advocates. Earlier this summer, US activist hedge fund Engine No. 1 secured three members on the board of ExxonMobil as part of its push for clean energy reforms at the US oil giant.
However, in a separate survey carried out earlier this month by EisnerAmper, just 17 per cent of hedge fund executives said their firm had an ESG portfolio. They pointed to a lack of standardised reporting and datasets (48 per cent), sourcing quality investment opportunities (20 per cent), and dispelling the notion of poor returns (17 per cent) as the biggest barriers to integrating ESG into their funds.
Like this article? Sign up to our free newsletter Author Profile Hugh Leask Employee title Editor, Hedgeweek Twitter Linkedin Related Topics ESG & Responsible Investing Impact Investing Research & Analytics Investing in Hedge FundsPico launches new flagship Corvil Analytics solution
Pico, a provider of technology, data and analytic services for the financial markets community, has enhanced its Corvil Analytics offering for electronic financial markets with the launch of a new flagship appliance, the Corvil 10000.
In today’s competitive, complex and evolving trading environment, Pico believes that maintaining performant trading infrastructure and robust monitoring systems for network transparency and data insights is paramount. The exponential increase in trading and data volumes, particularly since the onset of the Covid-19 pandemic, has accelerated this need for higher capacity infrastructure with up to four times faster initial uptake for 100Gbps deployments when compared to the previous transition to 40Gbps infrastructure. A new generation of high-performance analytics and data capture is required as the uptake of 100Gbps ethernet increases.
The Corvil 10000 establishes a new high bar for sustained throughput, with Corvil’s real-time accuracy and granularity hallmarks, to support the ever-increasing trading and data volumes in financial markets.
Highlights include:
• Sustained 100Gbps capture of packets for a forensic record of all network activity with real-time indexing to enable search, filter and export of the packets of interest, on a single 2U unit
• Accurate record including native hardware timestamping and support for third party timestamping by the leading packet brokers, also sustained at 100Gbps
• Network Analytics for 100 per cent of packets and flows – this includes TCP analytics for all flows with no topping and gap detection for more than 400 feeds
• Publishing of all flow analytics in real-time into third party data repositories (e.g. ElasticSearch) with support for up to 8 million active flows
• Multiple storage configurations ranging from 92TB – 660TB are available offering capacity and price flexibility
Corvil Analytics is used by the world’s largest banks, exchanges, electronic market makers, quantitative hedge funds, data service providers and brokers and has a twenty plus year legacy in extracting and correlating technology and transaction performance intelligence from dynamic network environments. The Corvil 10000 continues this legacy delivering the ability to capture data at high speeds and high volumes while providing analytics and visibility to support the continuity of trading technology performance, execution and trading performance as well as quick and accurate responses to regulatory inquiries.
“The Corvil 10000 appliance marks a significant evolution that equips clients with the analytics throughput to take on current and future traffic rates. In context, this unit can capture the entire US equities market, and US futures market, including OPRA A and B feeds for gap detection on one single appliance,” says Roland Hamann, Chief Technology Officer & Head of APAC at Pico. “The 10000 is the fastest selling Corvil product we have ever launched, reflecting the need for insight-powered performance as 100Gbps network adoption continues at a rapid pace.”
Quant Insight raises USD10m investment for European expansion
British macro analytics firm Quant Insight (Qi), the new quantitative financial market analytics and trading insights provider, has made a major expansion across Europe and the Middle Eastern (ME) territories, opening a new headquarters based in Limassol, Cyprus, in the Cedars Oasis Tower.
This news follows Qi’s recent scale up announcement, which has officially commenced after four years of research development and USD10 million in funding. The company also has offices in London, New York, Boston and Singapore and has clients with total Assets Under Management of over USD2.5 trillion.
Cyprus is a major global hub for Forex and Online brokerage companies, and well-positioned as a business gateway to access Asia, Europe, the Middle East and Africa. This will allow Qi to get closer and offer better services to their partners, customers and prospects across these regions.
Qi have also chosen Cyprus to launch its new retail product: iQ, which will bring cutting edge analytics and trading insights to individual retail investors worldwide. iQ is designed to help retail investors make well informed investment and trading decisions, where such insights were typically reserved for institutional investors – this offering will be made available later this year.
The new branch will be headed by Qi Partner, Zahi Younan, the CEO of Quant Insight Europe. Younan has over two decades of experience in Investment Advisory and Portfolio Management in multinational banks and family offices in UK and the Middle East. He holds an MBA and is a CAIA and CFA charterholder.
Quant Insight’s AI-based financial market brain (RETINA) scans millions of data points daily to provide a succinct overview on how macro forces are impacting all asset classes, from FX, indices and single stocks, to commodities, bond futures and cryptocurrency. RETINA reduces millions of data points into two to five essential daily insights and is already being used by some of the world’s best known investment banks, hedge funds and asset managers, including Alan Howard of Brevan Howard.
Zahi Younan CFA, CAIA, the CEO for Quant Insight Europe, says: “Cyprus was an obvious choice when it came to selecting the best placed base to lead our expansion into new markets and territories, as it is not only an ideal location to access markets in the adjacent continents, but it is also an emerging hub for traders, online brokers and retail investors in its own right.
“This expansion marks the first major step in the new growth and development stage of Quant Insight, and will shortly be followed by the launch of our cutting edge retail offering.”
Mahmood Noorani, CEO of Quant Insight, adds: “Zahi, both as a partner in Quant Insight and as CEO of Qi Europe, is a key addition to our team, and I am confident he will make major contributions to Quant Insight with his capability and experience.”
Liquidity solutions for FX funds
PARTNER FEATURE
FX trading is often seen as the poor cousin of equities when it comes to establishing and retaining a relationship with prime brokers (PBs); yet FX traders need access to services and liquidity just the same. One way for funds to access these requirements is the prime of prime model.
A challenging market
In the past 12-18 months, the FX market has been a challenging space, seeming to experience a split between larger existing players and new market entrants.
Sam Bratchie, Managing Director and Founder of fund administrator Ifina, comments: “From a start-up perspective, there has been a massive increase in enquiries, especially from traders who are looking to get into an institutional environment and can’t do it. Market volatility and getting no interest on your money in the bank means that people are looking for alternatives and this is encouraging new entrants to the hedge funds arena.”
Money managers and proprietary trading firms are also realising that they need more of a regulatory framework in order to carry out their trading activities, secure and raise capital investment and in turn grow revenues.
In the last few years with heightened global regulation from ESMA, CYSEC, FCA, ASIC etc., the retail FX brokerage segment has somewhat contracted and consolidated, leading a number of traders and firms turning to the hedge fund space as they look for more consistent, performance-based revenue streams. Additionally, proprietary, or buyside trading has increased due to the ease of access to API connectivity and algorithmic trading in recent years.
In contrast to Bratchie’s experience with start-ups, however, Philippe Bonnefoy, Founder of quant macro specialist, Eleuthera capital AG, has seen a marked drop in FX profitability. “This has been the most barren period in years,” he states. “Unless you are doing super-exotic stuff, volatility and intraday price dispersion has been killed by quantitative easing (QE).”
However, Bonnefoy does note that as QE ends the FX markets may be entering the most fruitful period of the cycle – if firms are already placed to take advantage of it. “It takes years for funds to get a track record, so they could miss a fabulous three years of trading,” he says.
Size and scale
This track record and the frequently associated size of the firm seems to be at issue in funds’ relationships with prime brokers too. Many prime brokers have not had an easy time over the last few years, with a notable downsizing taking place, which has impacted on their risk appetite and their costs.
One of the reasons for this is a shift in the regulatory environment. Adrian Marcu, Head of Investment Solutions at the multi-family office Belvoir Capital AG, comments: “There are regulatory requirements per liquidity provider and prime broker to do their reporting and checks per client, which has elevated the threshold of business that you have to provide per name. This raises the costs of the sell-side and the buy-side.”
Indeed, as prime brokerage becomes more capital intensive, the market is becoming increasingly segmented, creating a split between big, profitable clients and FX flow traders who are not providing the banks with enough income.
Jonathan Brewer, Commercial Director at ISAM Capital Markets, comments: “FX prime brokerage is a pretty low-yield business for banks. It is becoming more capital intensive so they need much more revenue from each client.”
He adds: “Barriers to entry to tier 1 PBs are significantly higher in terms of capital on account and fees to pay. Even after the initial threshold, there are significant amounts for funds to pay every year.”
And this is not the only risk when appointing a tier 1 PB: as Bratchie points out, prime brokers are liable to drop clients who do not provide sufficient income in what Brewer also terms “a regular cull”.
A new model
One option for smaller funds or new entrants to the market is the prime of prime model. Some such firms seek to offer a true prime broker service while others, such as IS Prime, offer clients access to credit, greater leverage, more understanding of flows, and the ability to curate liquidity appropriate to the trading style of each individual client.
Bratchie comments: “Clients starting with USD3, 5, or even 10 million are always going to struggle when PBs want guaranteed commission. Even if they start well and values then drop, they will still be turned off by a tier 1 PB. But prime of primes can offer them an institutional account and the ability to protect their alpha as flows are anonymised.
“Cost is paramount, too, as annual operational cost impacts severely on their NAV while their performance is audited. Start-ups don’t want a minimum monthly fee,” he adds.
Small firms also run into the issue of spreads: if they don’t have sufficient scale of flow, they can’t interest enough liquidity providers to compete for their flows to such an extent that they will receive good spreads.
“Clients can license a prime of prime’s spreads, buying power with the street, and scale of good quality flows,” Brewer says.
Funds also need to ensure they can cover the operational aspects of trading. Bonnefoy comments: “If you have an active market backdrop, that’s great, but if the market goes quiet you have to craft your own liquidity, and that sounds good until you have to manage it yourself which takes a lot of time and resource. There are a lot of mechanics behind the scenes and that’s where prime of primes come in.”
There can be a further issue for even larger or more established funds to contend with if choosing a tier 1 PB: that of internal structure and politics. “If you are trading multi-asset funds, it can feel like you are doing a ton of business with a firm, but FX is the little brother of equities and internal politics and P&L often don’t travel across departments,” Bonnefoy says.
“If you have 60 per cent of the equities book and 10 per cent of FX, you won’t get a really good deal on FX,” Bratchie adds.
The view of the allocators
One of the caveats to choosing a prime of prime rather than a Tier 1 PB might be the requirements of your allocators. End investors have traditionally liked the association with tier 1 banks, so how do they feel about this approach?
According to Brewer, it depends on the investors. “If you have certain names on the paperwork going out to investors, that will be the rubber-stamp you need in some cases. But those sorts of investors won’t invest anyway unless a fund has a critical mass of USD200-300 million.”
It may also be the case that funds are using a prime of prime for FX but a tier one PB for equities, which could allay those investors to whom a big name matters. However, Bratchie adds: “The investor base for small entrants isn’t looking for a KPMG or a Goldman Sachs. They want to know that the fund, the managers, the brokers are all regulated. They also need handholding. They don’t know the funds arena and they just want to get on with trading,” he concludes.
Long-term relationship
For some clients, however, a big name really does matter and, once they reach critical mass, they may wish to transfer business from a prime of prime to a tier 1 PB. But many funds either choose to stay with their prime of prime or to continue to maintain a liquidity relationship.
Bonnefoy says: “Price movement creates opportunity, and if not much is happening, it might require a shift of how people are pricing you. It helps if someone more liquid than you is aggregating the flow of many clients and doing it full-time – another utility that comes into play. That’s where the added value of an intermediary comes in.”
“There is the added benefit of the anonymity of using a prime of prime, especially when markets or thinner or you are trading something you don’t usually trade,” Mancu adds.
The next step
As the markets continue to move on from the uncertainties of Covid, Bratchie predicts that the slew of new entrants will continue, particularly in FX and crypto, with new funds and start-ups acquiring funding from family and friends. Prime of primes will therefore also be looking to move, or move further, into these spaces.
The issue of technology may also be a mover. “Prime brokers take a long time to get things going, so tech can be a costly problem,” says Mancu.
Bonnefoy agrees: “To the uninitiated technology stability appears completely unimportant, that is until it doesn’t work. You take it for granted until you can’t get into or out of a trade.”
With so many drivers for change and new market entrants looking for services they can no longer get from prime brokers, it looks like the prime of prime model is here to stay, in FX and beyond.
Replay the Hedgeweek webinar – FX Funds: Is the traditional prime broker model of accessing liquidity still relevant and what are the alternatives? – produced in conjunction with IS Prime.
Like this article? Sign up to our free newsletterHedge fund allocations soar
The hedge fund industry continued to attract new assets in August with USD30.5 billion in inflows. August’s inflows represented 0.69 per cent of industry assets, according to the Barclay Fund Flow Indicator published by BarclayHedge, a division of Backstop Solutions.
August marked the sixth consecutive month of hedge fund industry inflows, totalling USD143.8 billion since March. A USD37.8 billion monthly trading profit brought total industry assets to nearly USD4.52 trillion as August ended.
“As economies continued to rebound and equity markets surged throughout the summer, investors saw growth and speculative opportunities in hedge fund investments,” says Ben Crawford, Head of Research at BarclayHedge. “Hedge Funds may also be having a moment for less optimistic reasons: They have a history of performing well during inflationary periods. While central bankers contend that the recent spike in the cost of living will be transitory, forecasters in the U.S. and elsewhere are revising their inflation expectations upward for multiple periods to come.”
Most hedge fund sub-sectors reported inflows in August. Fixed Income funds set the pace bringing in USD10.4 billion, 1.1 per cent of assets while Multi-Strategy funds added USD7.5 billion, 1.6 per cent of assets, Balanced (Stocks & Bonds) funds saw USD5.1 billion in inflows, 0.8 per cent of assets, Sector Specific funds added USD2.96 billion, 0.8 per cent of assets, and Event Driven funds brought in USD2.28 billion, 0.8 per cent of assets.
The handful of sub-sectors experiencing net redemptions in August included Emerging Markets – Global funds shedding USD2.7 billion, 1.3 per cent of assets, Emerging Markets – Asia funds with USD2.47 in outflows, 1.3 per cent of assets, Convertible Arbitrage funds with USD769.2 million in redemptions, 2.4 per cent of assets, and Equity Market Neutral funds with USD251.5 million in outflows, 0.4 per cent of assets.
After posting inflows in July, the managed futures industry returned to net redemptions in August with USD168.6 million in outflows. The four CTA sub-sectors tracked were evenly split between inflows and redemptions during the month.
Discretionary CTAs brought in USD672.2 million in August, 4.3 per cent of assets, while Multi Advisor Futures Funds saw USD152.3 million in inflows, 1.2 per cent of assets. On the redemption side of the ledger, Systematic CTAs shed USD763.6 million during the month, 0.24 per cent of assets, while Hybrid CTAs experienced USD77.7 million in outflows, 0.42 per cent of assets.
For the 12 months through August the hedge fund industry experienced USD146.8 billion in inflows. A USD103.6 billion trading profit over the period brought total industry assets to USD4.52 trillion as August ended, up from USD4.40 trillion at the end of July and up from nearly USD3.38 trillion a year earlier.
Of the 19 hedge fund sub-sectors tracked, 12 posted 12-month inflows through August. Fixed Income funds led the way adding USD78.7 billion, 10.2 per cent of assets, while Sector Specific funds brought in USD56.6 billion, 25.3 per cent of assets, and Multi-Strategy funds saw USD25.6 billion in inflows, 7.4 per cent of assets.
Other hedge fund sectors posting notable 12-month inflows included Emerging Markets – Asia funds adding USD22.0 billion, 17.1 per cent of assets, Event Driven funds bringing in USD21.5 billion, 11.3 per cent of assets, and Equity Long-Only funds with USD13.1 billion in inflows, 8.9 per cent of assets.
Among the sectors with the largest 12-month outflows were Balanced (Stocks & Bonds) funds with USD28.2 billion in redemptions, 6.2 per cent of assets, Equity Long Bias funds shedding USD15.3 billion, 4.6 per cent of assets, Macro funds with USD13.3 billion in outflows, 7.3 per cent of assets, Equity Market Neutral funds with USD5.7 billion in redemptions, 9.3 per cent of assets, and Equity Long/Short funds with USD4.0 billion in outflows, 2.3 per cent of assets.
Over the 12 months through August CTAs saw USD9.72 billion in inflows. A USD21.6 billion trading profit over the period brought total industry assets to USD339.9 billion, up from USD304.8 billion a year earlier.
All four CTA sectors tracked posted inflows over the 12-month period. Systematic CTAs set the pace with USD4.9 billion in inflows, 1.7 per cent of assets. Discretionary CTAs added USD3.1 billion, 27.2 per cent of assets, Hybrid CTAs brought in USD1.7 billion, 18.1 per cent of assets, and Multi Advisor Futures Funds saw USD660.2 million in inflows, 6.4 per cent of assets.
Like this article? Sign up to our free newsletter Author Profile Related Topics Results & performance Funds Surveys & researchHITE Hedge appoints COO
HITE Hedge Asset Management (HITE Hedge) a USD670 million, alpha-focused investment firm specialising in the energy sector and its transition, has appointed industry veteran Howard B Rubin, CFA as its Chief Operating Officer.
Rubin has a successful multi-decade track record of managing institutional infrastructures and compliance for a variety of hedge funds and investment firms and will oversee all business management and operational functions at HITE Hedge.
Prior to joining HITE Hedge, Rubin was the Chief Operating Officer of Burrage Capital Management LLC, a Boston-based healthcare sector focused hedge fund he joined in 2018. Before that he was a Managing Member and Chief Operating Officer of Midwood Capital Management LLC, a Boston-based US small-cap long/short equity hedge fund he joined in 2012, and prior to that a Co-Founder, Managing Partner and COO of Tara Hill Capital Management LP, a Boston-based US long/short equity hedge fund firm launched in 2009. Prior to these roles he was a Senior Managing Partner at Boldwater Capital Management, a long/short hedge fund based in Boston, MA and spent 17 years as a Director and Member of the Executive Committee at Standish, Ayer & Wood, Inc (now Standish Mellon Asset Management).
"It is a great pleasure to welcome Howard to the team as we look to capitalise on increased institutional interest in our energy transition offerings," says James Jampel, Founder & Co-CIO of HITE Hedge Asset Management. "Our institutional infrastructure and operational processes have been key to our growth and Howard’s expertise and many decades of experience will make sure that they continue to go from strength to strength.”
Howard B Rubin, CFA, says: “What attracted me to HITE Hedge was the quality of its team and products and its specialised focus on generating alpha using energy securities. Additionally, HITE is a pioneer in the ESG space, having created a first-of-its-kind solution for investors seeking to profit from decarbonisation without taking net long exposure. I look forward to helping HITE grow its business.”
Rubin is succeeding Jim Conant, who is departing HITE in the fourth quarter of 2021. At that point Rubin will also have the titles of Chief Financial Officer and Chief Compliance Officer. Conant has served HITE in these roles since 2007 and the HITE team wishes him well in the next phase of his career.
Short-selling: Man GLG, Marshall Wace and BlackRock dominate UK-listed bearish bets
Man GLG, the discretionary hedge fund unit of London-headquartered global asset management giant Man Group, now holds the largest number of short positions against UK-listed stocks, followed by Marshall Wace and BlackRock, according to new industry data.
New analysis from ETP provider GraniteShares shows that GLG – the long-running discretionary manager which runs a range of long/short equity, emerging market and multi-strategy credit funds – held 23 negative wagers on publicly-traded UK names.
Both Marshall Wace, the high-profile long/short equity giant set up by Sir Paul Marshall and Ian Wace in 1997, and US-based global asset manager BlackRock Investment Management each hold 21 bearish bets in London-listed companies, while JP Morgan Asset Management and Ennismore Fund Management have taken nine short positions, GraniteShares said on Wednesday.
Jupiter Investment Management and AQR Capital Management each hold eight short positions.
Cineworld, the beleaguered global movie theatre chain, remains the most shorted UK-listed name overall, with more than 9 per cent of its stock held short by seven investment managers, the data shows.
Holding some 2.42 per cent of Cineworld’s shares, New Holland Capital holds the biggest bearish bet against the global cinema group, whose share price has endured a turbulent 18 months since the Covid-19 outbreak forced it to shutter 767 outlets globally. In March, Cineworld – a long-running target of hedge fund short sellers on both sides of the Atlantic – reported an eye-watering USD3 billion pre-tax loss for 2020.
FTSE 250-listed gold miner Petropavlovsk, whose operations are focused mainly in Russia, has 6.9 per cent of its stock held short by four short sellers.
Elsewhere, 6.3 per cent of property development and investment firm Hammerson’s stock is the subject of negative wagers by six hedge funds. Electronic payments provider Network International Holdings, and Wood Group (John) Plc, the Aberdeen-based engineering consultant, each have 4.6 per cent of their stock held short by four managers.
“Shorting stocks is no longer the exclusive pursuit of institutional investors, as sophisticated individual investors are now increasingly doing this,” said Will Rhind, Founder and CEO of GraniteShares.
Rhind noted the value of funds invested in its 3x short single stock ETPs listed on the London Stock Exchange was around USD34m million as of October 17, highlighting particular interest in certain US tech names such as Tesla, Uber, and Apple.
“Worries about rising interest rates have had an impact on more growth-oriented tech names presenting a potential opportunity for some sophisticated investors seeking to take advantage of price declines over recent weeks.”
Like this article? Sign up to our free newsletter Author Profile Hugh Leask Employee title Editor, Hedgeweek Twitter Linkedin Related Topics Distribution Long-short investing Markets Results & performance Investing in Hedge FundsSEI acquires Finomial
SEI has acquired Finomial, an investor lifecycle management firm offering cloud-native financial technology. The technology is expected to be added to SEI’s existing investor-focused platforms to further enhance automation and digitisation capabilities, as well as reporting and transparency.
“We were impressed with Finomial’s cloud-native investor-focused technology platform. We see potential for immediate applications of their digital collaboration tools and solutions—not just in our outsourcing and fund administration services, but also in our wealth management solutions,” says Steve Meyer, Head of SEI’s Global Wealth Management Services. “We’re excited to welcome the Finomial team to the SEI family, as we believe their expertise in cloud-native technology will help drive our strategic initiatives as we continue to execute our One SEI strategy. We’re also pleased to welcome Finomial’s clients, who will continue to benefit from Finomial’s technology, as well as SEI’s scale.”
Finomial’s cloud-based technology is expected to complement SEI’s existing platforms, including SEI Trade, the SEI Manager Dashboard, SEI Investor Platform and the Global Regulatory and Compliance Platform. This technology will add data-mapping tools, flexible data models, and rules engines to further enhance current capabilities. The technology has the ability to enhance and streamline existing anti-money laundering and know-your-client services, while adding depth and flexibility to data and reporting capabilities.
Finomial Founder and CEO Meredith Moss joins SEI, alongside a total of 42 engineers, developers, cloud specialists and client service personnel from the US and India. This talented team will support a smooth integration, and their deep domain expertise in cloud development will be an invaluable asset to SEI. We believe Finomial’s clients, representing approximately USD500 billion in assets under administration, will also benefit from the combined expertise and expanded opportunities for alternatives market participants.
“We believe time is better spent building investor relationships, not managing documents and workflows. We built Finomial to transform interactions between investors, asset managers, and asset servicers—encouraging collaboration and transparency, while maintaining peerless regulatory compliance,” says Moss. “I’m proud to be part of the SEI family and to continue our efforts across SEI’s platforms and clients. The SEI team shares our commitment to fostering relationships, and we’re excited to continue our work on a larger scale.”
Like this article? Sign up to our free newsletter Author Profile Related Topics Deals & Transactions Acquisitions Finance & InsuranceGaining the Edge announces charity events to improve networking across January Florida Cap intro conferences
In mid-January 2022, South Florida will host thousands of alternative investment fund managers and investors attending multiple capital introduction conferences. Gaining the Edge, one of the industry’s prominent thought leaders and event organisers, has announced a strategy to improve networking across these multiple events while raising money for charities that benefit at risk youth.
Gaining the Edge will host a day of charitable, social activities open to all industry professionals including those attending other cap intro events on Saturday, 22 January, directly following its Gaining the Edge Cap Intro Florida conference.
Opening participation to attendees of other, potentially competing, events is made possible by Gaining the Edge’s commitment to donate 100 per cent profits to charities that benefit at-risk youth. The four confirmed events include a charity golf tournament hosted at PGA National (with registration only recently opened the tournament is already 40 per cent sold out), a charity Everglades airboat tour, a charity tennis clinic/tournament hosted at PGA National, and a charity sunset cruise.
Record high participation rates are anticipated for these Florida conferences with many companies attending multiple events. This is due to a projected surge in manager search activity amid what is expected to be the greatest asset-raising environment in the history of the alternative asset industry.
Don Steinbrugge, CEO and Founder of Gaining the Edge, says: “Professionals in the alternative investment industry are eager to resume in-person conferences and meet people face to face. As they travel to Florida to attend one or several of the conferences, many are looking for to meet with industry peers, share ideas, and have fun. We believe these charitable events are a great way to promote industry-wide camaraderie while also raising money for a great cause.”
Align recognised as Best Cybersecurity Provider in Hedgeweek US Awards
Align, a global provider of technology infrastructure solutions and Managed IT Services, has been voted as “Best Cybersecurity Provider” in the Hedgeweek US Awards 2021.
This recognition is based on an online peer-review survey in which investors, hedge fund managers and service providers are invited to nominate a “best-in-class” in a variety of categories.
Over the past 18 months, Align Managed Services and its dedicated Cybersecurity Advisory team have ensured that their clients were able to operate their firms seamlessly and securely while addressing the compliance, operational and security challenges associated with the pandemic and subsequent industry shifts.
“To meet client demand, Align is continually evolving its services to account for industry changes. As a result of this dedication to innovation, Align was the first firm to offer a built-in Cybersecurity Advisory team as part of a Managed IT Services offering,” says John Araneo, Managing Director, Cybersecurity & General Counsel. “The Align Cybersecurity team really pioneered the concept of providing model cybersecurity programs that are appropriately scaled for investment advisers.”
As cybersecurity controls continue to evolve and adapt to ever-changing threat vectors, regulatory regimes, technologies, prevailing security standards and more, it has never been more critical to approach cybersecurity from the ground up by focusing and investing more in the underlying IT infrastructure.
“We are honoured to achieve recognition for our Cybersecurity services as the superior solution within the investment management space,” says Vinod Paul, Chief Operating Officer at Align. “By strategically unifying our Managed IT Services and Cybersecurity Advisory Practice, we can provide our clients with a robust, cost-effective, comprehensive solution that scales with their needs while addressing all of their technological, security, governance and compliance requirements.”
Align Cybersecurity, Align's leading-edge Cybersecurity Advisory Practice led by a multi-disciplinary team of industry subject matter experts, provides appropriately scaled cybersecurity solutions that address current regulatory and compliance requirements and meet prevailing operational due diligence standards and investor expectations.
Bitcoin Latinum now trading on DigiFinex
Bitcoin Latinum (LTNM), the next generation, insured, asset-backed cryptocurrency, has officially listed on the DigiFinex exchange, opening over 200 per cent in its first hour of trading. Bitcoin Latinum congratulates DigiFinex on a successful launch, and everyone who has supported the project.
Monsoon Blockchain, Bitcoin Latinum’s developer, plans for Bitcoin Latinum to officially list on seven top-tier public exchanges, under the ticker LTNM. In addition to DigiFinex, the exchanges are: HitBTC (the fifth largest exchange by volume at USD4 billion), FMFW (formerly Bitcoin.com and operating with USD3.3 billion in daily trading volume), Changelly (USD2.71 billion in daily volume), Changelly Pro, Bitmart (USD1.6 billion in daily volume), and XT.com by the end of 2021.
Headquartered in Singapore, DigiFinex boasts over four million users across the globe, and can be accessed by users in 150 countries. With daily trading volume around USD1 billion, DigiFinex is one of the top rated global cryptocurrency exchanges that offers spot, leverage, perpetual trading and fiat to crypto trading. In addition, DigiFinex offers unparalleled 24/7 customer service for its user base.
Bitcoin Latinum was built as an open-architecture cryptocurrency technology, capable of handling large transaction volume, cybersecurity and digital asset management. Based on the Bitcoin ecosystem, Bitcoin Latinum was developed by Monsoon Blockchain Corporation on behalf of the Bitcoin Latinum Foundation. LTNM is a greener, faster and more secure version of Bitcoin, and is poised to revolutionise digital transactions.
Unlike other crypto assets, LTNM is insured, and backed by real-world and digital assets. Its asset backing is held in a fund model, so that base asset value increases over time. It accelerates this asset-backed funds growth by depositing 80 per cent of the transaction fee back into the asset fund that backs the currency. Thus, the more Bitcoin Latinum is adopted, the faster its asset funds grow, creating a self-inflating currency. The listing on DigiFinex highlights Bitcoin Latinum Foundation’s commitment to supporting the growth of a sustainable crypto ecosystem.
Bitcoin Latinum was developed with a highly scalable network that will initially support up to 10,000 transactions per second and millions of transactions per day to facilitate retail transactions. With its Proof of Stake (PoS) consensus method, Bitcoin Latinum ensures the network facilitates more transactions per minute at lower transaction fees. Utilising an efficient consensus mechanism, Bitcoin Latinum provides a much better on-chain payment network compared to Bitcoin, with an average transaction confirmation in 3-5 seconds.
LTNM is one of the greenest cryptocurrencies in existence, and recently joined the Crypto Climate Accord. Utilising its advanced Proof of Stake (PoS) mechanism, LTNM holders will earn rewards for holding their coins as collateral to stake on the Bitcoin Latinum network. This leads to less electricity consumption. LTNM reduces the energy consumption to only 0.00015 kWh per transaction.
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