The right relationships are vital to success
For award-winning boutique prime brokerage Global Prime Partners this year has seen the firm go from strength to strength, laying further foundations to their reputation as one of the hedge fund industry’s ‘go to’ service providers to small and medium sized hedge funds.
“It’s been an incredible year for us,” enthuses Kevin LoPrimo (pictured), Global Head of Hedge Fund Services at GPP. “Even before mid-2013 we had equaled all of last year’s revenue.”
Part of the reason behind GPP’s success is the quality of partnerships it is building within the marketplace. With counterparty risk high on the agendas of both managers and investors, the stronger the relationships in place the better: be they trading partners, custodians or technology firms. Just last month, for example, the firm appointed BNY Mellon as its global clearing and custody provider; a huge fillip for the smaller managers that Global Prime Partners supports.
GPP is a product of two business lines. Originally it was founded purely as a clearing firm. Four years ago LoPrimo joined and added the prime brokerage side of the business. “The BNY Mellon relationship is more around the clearing and custody side of our business but it could be used for either.
“We are doing some clearing and custody work with Deutsche Bank as well. In total we now have four financial institutions behind us: BNY Mellon, Deutsche Bank, Kas Bank and Nomura.”
Until now the technology platform that GPP had built internally to support the prime brokerage needs of its clients was centered on post-trade workflows. It was, as LoPrimo says, never their intention to build an execution platform but rather to look for the right partner.
This has led to a strategic partnership with New York-based technology firm Liquid Holdings Group.
“We had the technology in place to support everything after a trade has been placed. What Liquid has is the technology to facilitate the trade happening via EMS and OMS on the front end and real-time risk monitoring. Those are value-adds that we didn’t previously have,” explains LoPrimo.
GPP has provided demos to over a dozen of its clients who are now “hungry” to get the Liquid technology installed. This illustrates perfectly how the right relationships – be they custodian and clearing or technology-based reporting and risk monitoring – can work to the advantage of both the service provider firms and their clients.
“There’s no secret sauce behind the scenes. We just provide a high level of service and have good quality people supporting our clients. It’s a combination of technology and people and basically being attentive to managers who are not big enough to use bulge bracket brokers.
“If they did get in with a bigger prime they would be charged a lot more because almost all the larger firms have a minimum yearly revenue target of somewhere between USD250-500K. We don’t have that constraint. Smaller managers will also need to compete with managers many times their size if serviced by the larger primes. Someone running a USD10million fund is going to struggle to compete with multi-billion dollar funds for a return phone call or a stock borrow.”
Investors are increasingly targeting smaller hedge funds but the universal question they have is ‘How robust is the infrastructure of a USD50million fund?’
“That’s where we come into play, bringing in partners like Liquid Holdings, Nomura, Deutsche Bank, Kas Bank and BNY Mellon to provide a stable environment for smaller managers to operate in,” states LoPrimo.