The coming year could bring a strong launch market, with new funds and emerging managers coming to light. This could lead to an interesting dynamic as the prime brokerage industry continues to change and evolve. Will these new launches have a hard time finding a pb home?
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The coming year could bring a strong launch market, with new funds and emerging managers coming to light. This could lead to an interesting dynamic as the prime brokerage industry continues to change and evolve. Will these new launches have a hard time finding a pb home?
After a volatile 2022, with many funds suffering negative performance, the industry could see an increase in the number of new funds. High performing portfolio managers and analysts may decide to spin out of large shops in reaction to poor bonuses. This dynamic may cause a sudden jolt of entrepreneurial spirit. Also, there will inevitably be departures or closures and re-launches from large funds that get hit with redemptions at year end. “With the market possibly hovering near the lows, allocators may also start to trickle back in and re-allocate their investments. Emerging managers have also shown outperformance vs large firms, which may also be a tailwind for prospective new fund managers,” says Jorge Hendrickson (pictured, above-right) co-head of prime services at JonesTrading.
Turbulent market periods tend to give rise to a divide in the market which sees some managers perform to the highest degree and others lagging behind. “There is a wide range in returns this year,” observes Hendrickson, “those who performed well are looking forward to telling that story to investors. While those who have not, are crafting their message as to why investors should choose them for the next market cycle, continued volatility and uncertainty, or a rebound.”
In reaction to this, some funds are taking the opportunity to make operational changes in their providers, technology and staff. Some of these changes were forced by a decision some prime brokers took to set unwelcomed revenue minimums or shift their resource focus and client base strategy.
“We believe the boutique prime brokers who can fill the existing market gap will do well, which is where JonesTrading Institutional Services is well positioned,” outlines Mark McGoldrick (pictured, above-left), co-head of prime services at JonesTrading, “Funds are also taking a hard look at their internal trading workflows and staff, resulting in an increase in outsourced trading mandates and prime brokerage conversations focused on technology, client service and reporting. Funds and providers are forced to operate with lean headcounts and are focused on providers who can consistently provide them with the support needed. This is the high-touch approach that JonesTrading is focused on delivering.”
Funds are also re-thinking he best ways to market themselves in the post-covid world and as a result, are looking for prime brokers who are approaching capital differently and leveraging technology to offer a more comprehensive solution. This includes data and customer relationship management integration, platforms to efficiently display a fund to investors, as well as events that are more focused on capturing the right audience, which often means remote interaction versus in person events. Hendrickson notes: “At JonesTrading, we are building a different cap intro offering with traditional and non-traditional elements, which we believe will meet these new client needs.”
