After two years of virtual introductions, are capital introduction services still a cornerstone of the prime services industry in the way they were pre-pandemic?
After two years of virtual introductions, are capital introduction services still a cornerstone of the prime services industry in the way they were pre-pandemic?
While the face of capital introduction services may have drastically changed across the course of the pandemic, these services remain essential to the hedge fund industry and have adapted to a (post) pandemic world.
The million-dollar question: is the future of capital introductions virtual or in-person?
The capital introduction world has evolved over the course of the past ten years. With the crash of ‘08 and the pandemic throwing turmoil into set ways, cap intro services have moved with the times and adapted to varying circumstances.
“Before the global financial crisis, very few hedge fund managers had marketing teams, and those that did had limited personnel. Then, when hedge funds started to become more institutionalised, the client base changed and suddenly most hedge funds needed an in-house sales team team,” observes Marlin Naidoo, global head of capital introduction, BNP Paribas.
For many prime brokers, the pandemic has proven that moving prime brokerage services, such as capital introductions, online has its benefits and can often be extremely efficient.
Eamon McCooey, head of prime services, Wells Fargo says: “Prior to Covid, most capital introductions meetings were held in person, often this was prohibitive in both costs as well as limiting the audience. With the onset of the pandemic, cap intro teams had to adjust their engagement model from in-person to virtual meeting settings.”
However, despite this Naidoo states that investors are now “chomping at the bit for in-person events” and maintains that events will not be left redundant after the pandemic.
“I would go so far as to say that people have virtual fatigue; virtual events have their benefits in terms of cost-efficiency and time efficiency, but managers and investors want to meet each other in person. In-person events provide an opportunity to network with one another less formally, which is an important factor in building relationships.”
The future of these services lies in striking the correct balance between virtual and in-person contact. The pandemic changed the face of what capital introductions stood for (in-person events and introductions) and opened new opportunities for the service.
Naidoo believes that BNP Paribas have found a good balance for this through their newly launched digital cap intro service called ‘Bridge’: “bridging the gap between investors and managers, both in-person and virtually”.
The service looks to store essential content, providing information and analysis around asset raising. It’s about efficiency and scalability, knowing the investors and managers in the space, and seeing what they’re doing.
Access
Speaking about the launch of Bridge, Naidoo says: “the pandemic forced this to come to fruition; it was something that we had already been working on before 2020, but the lack of available travel and in-person meetings created a real need for it.”
Aaron Steinberg, head of capital introductions, BNY Mellon | Pershing also notes how the pandemic “opened-up people’s calendars, and managers’ ability to meet with allocators increased.”
The change in capital introduction services across the last ten years proves how quickly the industry needs to adapt to keep up. It’s almost certain that things will once again evolve over the next few years.
Commenting on the future of the industry and service, Steinberg says: “We’ve been talking about access for a number of years, given the broader demographic of investors in the marketplace beyond just institutions who want to gain access to hedge funds and other alternative strategies. I think there will be more managers of all sizes looking to gain exposure and broaden their investor base through cap intro.”
Regarding the future of events, Naidoo predicts that virtual events will continue to play a big role and thinks that the balance will sit at 25 per cent in-person events and 75 per cent virtual.
McCooey says: “This virtual environment has opened up meetings to larger audiences as well as making it more efficient for the fund managers in both time as well as enhancing the potential investor participants. I still believe you will see the return of the large marquee capital introduction events, but I think more of the day to-day engagements will be done via video technologies.”
Read the full Charting New Territory: The future of hedge fund prime brokerage Insight Report here.
