Acquisition creates bigger landing pad for managers
2015 has been a big year for Concept Capital Markets, LLC. Earlier this year, the firm entered into an agreement to be acquired by Cowen Group, a leading growth investment bank and alternative investment manager with a heritage dating back to 1918.
Through its acquisition of Concept Capital, Cowen will add a significant prime brokerage arm to its overall offering.
"Cowen is a notable name in the institutional equity research, sales, trading and investment banking business through its Cowen and Company brokerage, as well as in the alternative asset management space through its Ramius investment adviser," explains Jack Seibald (pictured), one of Concept's founders and managing members. "Though the firm has not been in the prime brokerage business, its leadership team has had a great deal of experience as both a client and provider of prime services", he adds.
Peter Cohen and Jeffrey Solomon, respectively Chief Executive Officer and President of Cowen Group, co-founded Ramius alongside several other partners in 1994.
"Based on their knowledge of the PB business, Cowen made a strategic decision to expand into the PB space because of the changes taking place in response to regulation," explains Seibald. These changes are largely a result of market regulation such as Basel 3, and are causing the prime brokerage divisions of global banks to scale back operations and shrink their support of hedge fund clients.
Concept Capital witnessed this impact first hand in February when J.P. Morgan – one of five clearing firms that Concept had in place – decided to stop supporting introduced prime clients. That Concept leverages a multi-clearing model meant that it was able to absorb the impact with minimal disruption to its clients. The other clearing agreements in place are with Pershing, Merrill Lynch, Merrill Lynch Professional and Chinese bank, ICBC.
A fifth clearing agreement is about to be finalised with a US bank, confirms Seibald.
"As Cowen began to explore the opportunity of creating a prime brokerage business, Concept's name popped up in their discussions with numerous large clearing firms with which we've had clearing relationships. Five minutes into having the first meeting with Cowen Group, we knew we were speaking to the right people," says Seibald, who continues: "From our perspective, we would become affiliated with a well-regarded firm run by like-minded people who put clients first and assist them in their effort to outperform for their investors. The financial and intellectual resources of Cowen would allow us to more rapidly develop value-added solutions for our clients and position us to compete even more effectively. Providing our clients access to Cowen's respected research, its coveted industry conferences, and its flow of public offerings will also prove to be a significant benefit."
The business will be rebranded as Cowen Prime Services, but from a daily operational perspective, clients will not be affected.
"The affiliation with Cowen is already bearing positive results as its recently announced acquisition of Conifer Securities will immediately expand the combined footprint of the newly minted Cowen Prime Services,” says Seibald.
"There will be continued downsizing within the PB space as banks aim to optimise their balance sheet utilisation, and this makes it increasingly likely that more hedge fund managers will need to explore alternative prime solutions. Partnering with Cowen, we will offer a better landing pad for these hedge fund managers."