Interview with James Alexander, Commercial Officer at Invast Global
How is bank regulation helping Invast Global win market share from traditional prime brokerages?
There is no doubt that the suite of bank focused regulations has been a tailwind for Invast. Of the regulations currently curtailing banking activities in Prime Broking, Basel II has been the greatest catalyst for the shift in appetite to onboard various client types, especially smaller or emerging managers and brokerages looking to distribute products to a broad retail audience.
MiFID / MiFIR are also having an impact, generally favouring the boutique organisations who can respond rapidly and are able to focus on market niches.
Importantly though, our successes have not been to the detriment of the tier 1 banks. As we utilise the services of three bank prime brokers, we are essentially acting as an aggregator of clients for our PB’s who often refer clients to Invast, so the relationship is symbiotic.
What are the benefits to emerging hedge funds using a non-bank prime broker and why do you feel Invast Global is well positioned to meet their needs?
The single most important benefit is access. One significant challenge facing many emerging managers is the ability to access global markets on commercial and risk terms that allow them to focus on generating alpha and growing their funds. By utilising Invast Global, fund managers have access to over 30 equity and futures exchanges as well as liquidity in FX, metals and commodities globally. Our clients are able to consolidate their trading capital into a single cross-collateralised account for improved capital efficiency.
The second benefit is costs. Unlike most traditional prime brokers, Invast Global does not charge a minimum monthly fee. We understand that these charges can hinder the growth of an emerging fund manager. Furthermore, our prime services team works closely with our clients to ensure that their commercial agreements facilitate long-lasting relationships. We want our clients to develop and thrive.
Service is another area that sets Invast Global apart. The professionalism across the entire team gives customers a consistently positive experience. Our service levels befit the ‘high-touch’ style manager, who requires far more than execution and a trading statement. We are nimble and innovative, which ensures that our client’s needs are swiftly met with a bespoke solution.
Invast Global has quite a diverse client base, including managers that are just establishing their fund after leaving a much larger one, funds that have a bank prime facility as well as one with us and funds that have simply not been able to justify the commercial requirements of a PB facility.
What enhancements/changes have you made to your bank and non-bank Liquidity Provider (LP) mix over the last 12 months?
2017 saw two key themes come into sharp focus for our liquidity management team. The first of these was the continued rise in prominence (and volume capture) of the non-bank liquidity providers, a trend we saw emerging over 2015 and 2016. The ability of the non-bank LPs to make material impacts on pricing and liquidity, especially in the crosses and exotic currency pairs has been clear. Metals and other commodities are another area where the non-banks have begun to capture significant market share through aggressive pricing and high quality, low market impact execution. It is important to note that in the G7 currencies, the major bank LPs still form the liquidity bedrock, with aggressive skewing from the non-bank LPs providing additional spread compression.
The second driver of change in the liquidity space has been the FX Global Code of Conduct (FXGCC), of which Invast has been a strong supporter and advocate. There is within Invast, a preference towards using LPs that have clearly stated their adherence to the FXGCC and we believe that there are distinct and practical benefits for our clients from this position. This has already proven to be true as many of those clients are now in a position where they are required to demonstrate best execution capabilities to their own customers.
Keeping on top of trading costs is important for any manager, and under MiFID II they will have to demonstrate that best execution is being delivered on behalf of their investors. How is Invast Global able to optimise the way that its clients execute their strategies using the best liquidity, at the best price?
As a non-bank prime broker, Invast provides clients credit intermediation and liquidity provision to a degree of transparency and level of control unprecedented in the market.
Invast Global clients are given transparent access to our many liquidity providers across a range of asset classes and can – in conjunction with our expert liquidity team – customise their liquidity mix to best suit their trading and execution style. Our clients also have access to a suite of execution algorithms covering a variety of orders types to allow them to achieve the best price with minimal value leakage. With the right liquidity and execution methodology backed up with pre and post trade transparency, managers are clearly able to demonstrate best execution for their clients.
In what ways is the firm leveraging new technologies to improve transparency, both pre- and post-trade, to strengthen client relationships?
Invast is already leveraging numerous technical resources to not only deliver greater transparency, but to optimise the execution strategies of our clients. Various forms of Transaction Cost Analysis (TCA) programs are at the heart of this conversation. Being able to clearly demonstrate the dollar cost value of market impact is hugely beneficial for our clients in maximising value capture.
How would you sum up 2017, from a business growth perspective? Any key milestones achieved?
2017 has been a year of exceptional growth for Invast Global. We have continued to expand our client base in scope and scale and are looking forward to executing our growth and expansion plans in 2018.
There were a quite a few key internal milestones reached in terms of turnover, client numbers and overall profitability, but the truth is, given the scope of the opportunity and the regulatory tailwinds we foresee, our greatest successes still lie ahead.
What will you be focusing on in 2018 to continue to grow Invast Global’s revenue stream?
The continued growth trajectory of the business will encompass significant geographic expansion. London and Hong Kong offices are planned for launch in 2018, with further expansion in Europe and Asia likely in 2019.
