The market rally in 2013 hasn’t necessarily translated into significant trade volumes among hedge fund managers. This is primarily due to the fact that the market’s one-directional, low volatility performance is less fundamentally driven and more fuelled by central bank action; something that hedge fund managers, especially fundamental equity shops, really do not enjoy. For clients of Concept Capital, one of North America’s leading introducing brokers, things are no different.
As one of the principals of Concept Capital, Jack Seibald, explains: “The overwhelming topic of conversation continues to be whether the Fed and other central banks will continue to buy enormous amounts of securities every month, or whether they will “taper” that activity some time in the near future. It’s hard for managers to trade in this kind of market when it’s being driven by something exogenous.”
One feature of absolute certainty for Concept Capital this year is that in terms of winning new mandates among emerging managers, it has been one of the best in Seibald’s memory.
“The interest in emerging managers, from what we see, has increased. It’s not just family offices and fund-of-funds looking to allocate, but also larger, historically more conservative investors such as endowments and pension funds, in part because these managers, as a group, are outperforming their larger brethren,” says Seibald.
To call these managers “emerging” is, perhaps, a slight misnomer. Although some will be prop desk traders with no specific hedge fund experience, many hitting the street are 2nd generation hedge funders who have cut their teeth in well-established hedge funds.
“They are known in the industry and they’re attracting a higher calibre of investor. They’re launching with a materially higher AuM base and that makes them more viable. For us, the first four months of 2013 have been the best we’ve seen in terms of winning new mandates from emerging managers.
“Most are long/short equity managers, sector specialists, but we’ve also taken on managers with fixed income, distressed and event-driven strategies as well.”
So why are these emerging managers flocking to Concept Capital?
Largely, it is because the firm has significantly ramped up the depth and quality of its offering in recent years. Getting that message out there takes time to disseminate but the traction enjoyed by Concept seems to suggest that this is now being realised. Of course, winning industry awards also helps reinforce Concept’s reputation among the investment management community.
“We are excellent partners to hedge fund managers and their other service providers. We do a lot of consulting work with managers as they prepare to launch so that by the time they engage legal advisers, administrators, auditors, IT and other infrastructure service providers, managers are well informed of their needs and have an appropriate level of expectation regarding their launch. We provide a value-added service to hedge fund managers during the early stage of launching the fund that proves quite helpful,” explains Seibald.
“Our reporting capabilities have also played an important role in our client service. We make life easier for managers, and in turn their auditors and administrators, because we can provide clean data in a standardised format, which helps significantly when they are striking a fund’s NAV and conducting audits.”
On winning the award this year, Seibald comments: “At Concept Capital we aim to earn our clients’ business every day by serving as a trusted and loyal partner, and it is very gratifying for our entire team to be recognised by Hedgeweek for the services we provide them.”