“As we’ve matured and the industry’s needs have grown, we’ve continued to make investments aimed at providing solutions to emerging and more established managers as opposed to solely supporting the start-up market,” explains Jack Seibald (pictured), managing member at Concept Capital Markets LLC. “Start-up managers remain a core pillar of our business. However, given the increasing regulatory requirements and the demands for greater transparency by investors a lot of the solutions we’ve built answer the needs of managers who might otherwise not have thought of us.”
The clearing and custodial relationships Concept Capital has with JP Morgan, Pershing/BNY Mellon, and Merrill Lynch are hugely important to start-up managers. But thanks in part to its relationship with sister firm, ConceptONE, Concept Capital is strategically extending its reach to do business with the wider hedge fund manager community.
“More managers are coming out of larger firms with teams of five or six people and launching funds with a higher initial AuM. We’ve started to engage with such managers in a variety of ways, even when they’ve chosen to go to one of the larger primes directly. That made us realise we don’t necessarily have to be the introducer of the account to one of our clearing partners. We can still provide a variety of services to them, be it outsourced trading or live aggregated portfolio and risk reporting,” says Seibald.
The additional services stem in part from the symbiotic relationship with ConceptONE, which provides portfolio and risk analytics and reporting, and increasingly regulatory reporting under the schemes implemented in the US and Europe. Some of the data aggregation and reporting technologies developed for these services have been repurposed by Concept Capital, which can make certain value-added services available to its prime brokerage clients.
“We want larger managers to see the value in using us for other things like outsourced trading, live portfolio and risk reporting, end of day portfolio reporting. It’s about taking the technology services we’ve already developed within the firm and extending the reach of those services to a different set of emerging managers and more established managers who are looking for a more efficient solution,” adds Seibald.
One example of this is the outsourced trading solution that Concept Capital offers. This year, it has won significant mandates from two large allocators to be the outsourced trading solution for a series of managers they are investing in via managed accounts.
“Our traders are functioning not just as the broker when they are trading with Concept Capital, but representing those managers when trading with other brokers on the Street.
“We can do all of the consolidated reporting to those managers and the investors allocating to them. It opens up a whole new potential customer base that we’ve not previously reached out to.”
Offering this suite of additional services is one of Concept Capital’s key differentiators to the start-up market. After all, any ambitious manager will need to demonstrate that they have solid risk management and reporting capabilities to attract potential institutional investors.
“Start-up hedge fund managers tend to focus on capital introduction and execution and financing rates. We’re happy to engage with them on these terms, but in our minds it’s about offering the additional services discussed and partnering with managers as their operational needs become more complex,” concludes Seibald.