Outsourced trading as a credible alternative
Cowen Outsourced Trading: Best Outsourced Trading Solution Provider – The past year has witnessed a growing acceptance of outsourced trading as a credible alternative solution by investment managers. As a result of the global pandemic, larger players acknowledged that working with traders remotely works well, which in turn opened the door to the outsourced solution.
In fact, Jack Seibald, managing director and global co-head, prime brokerage & outsourced trading, Cowen, comments: “We identified opportunities to deliver our services to larger and more established investment management firms, hedge funds and traditional long only managers. Hedge fund managers, conscious of the need to generate idiosyncratic returns, are focusing their attention on security selection and portfolio management. In doing so, they’re also becoming more mindful of the credible outsourced solutions available to them for all of the non-investment related functions of their businesses.
“We see the engagement with such outsourced solutions providers as an integral part of the hedge fund and investment management industry’s future. It’s allowing managers to leverage the expertise and infrastructure that such providers possess, while at the same time being able to focus principally on their portfolios. To us this is quite evident in our outsourced trading business and the continued rapid growth we’re experiencing in our client base round the globe.”
Despite the broader challenges, 2020 was a year which saw hedge funds prove themselves. “The many dislocations that followed the pandemic created investment opportunities for active managers. As an asset class, hedge funds provided their investors with downside protection during the depths of the market crises in the first quarter of last year. Then they went on to deliver significant returns in the months that followed, as managers identified sector and security specific opportunities, both on the long and short sides,” Seibald outlines.
From a business development perspective, Cowen launched and initiated the rollout of outsourced trading solutions in foreign currencies and credit instruments over the past year: “We committed to these asset classes. We identified opportunities to provide these solutions through discussions we engaged in with many investment management firms, and found a significant vacuum in the market place.”
The firm first introduced its FX solution in the first half of 2020. This project has now ramped up with a team of 10 traders and trade support staff that follows the markets around the clock. “This business is well on its way to contributing its budgeted first full-year of revenues and profits,” Seibald states.
The fixed income offer came together more recently as Cowen hired an industry veteran with both trading and trading technology experience in the credit markets to harness the firm’s fixed income resources and deliver a credible outsourced solution in a segment of the financial markets far more complicated than equities. This effort is underway and Cowen has already engaged with clients and liquidity providers with additional hires being likely over the near term.
Throughout 2021, Cowen will also be deploying more engaged marketing efforts across Europe and Asia. Seibald details: “Outsourced trading has been utilised by managers in the US for decades. However, the service is much newer to international markets. Through programmes aimed at informing investment managers of the benefits of the outsourced trading in general, and the bespoke solutions we offer, we believe we will have a meaningful opportunity to grow our client base in Europe and Asia.”
Jack Seibald, Managing Director, Global Co-Head of Prime Brokerage and Outsourced Trading
Jack Seibald was a co-founder and managing member of Concept Capital Markets, LLC until its acquisition by Cowen Group, Inc. in September 2015. He has been affiliated with the firm and its predecessors since 1995, and has extensive experience in prime brokerage, outsourced trading, investment management, and research dating back to 1983.