At the advent of the pandemic, Cowen Outsourced Trading acted quickly to move its global personnel to a remote working environment by mid-March. Its swift embrace of new technologies and its ability to utilise them across the business – trading, client support, new client onboarding, and capital introduction – enabled it to sustain service to existing clients, while extending its reach to new ones.
“Our personnel had access to all capabilities and were able to service our clients seamlessly during the height of market volatility and volume,” says Jack Seibald, Global Co-Head of prime brokerage and outsourced trading at Cowen.
This approach proved critical to the firm’s clients and resulted in a record year for revenues and profits. “In part because of the pandemic, we saw a good bit of movement within the prime brokerage business and were the beneficiaries of clients opting for a different – we like to think better – solution than the one they had,” he adds.
In the midst of all this disruption, Cowen also assumed the international prime brokerage business of a key rival. Seibald notes: “We have continued to succeed in our business development efforts this year in the US as well as in Europe and Asia. The latter two have seen a particularly significant increase in their client rosters so far.”
Like all service providers, Cowen has been operating in a volatile market, with challenges beyond the pandemic, including the “meme” stock short squeezes and the Archegos implosion, which resulted in fund managers trading more actively in an attempt to de-risk their portfolios and, in many instances, to capture the dramatic swings in prices. “We also saw managers shy away from single stock shorts for some time to avoid getting caught by the squeezes,” Seibald says.
New launches have continued apace this year, with many notable start-ups by managers coming out of large, well-known platforms. “This cycle of regeneration is as good as we have seen it in years and appears likely to continue over the near-term,” he comments. Driving this, in part, is a renewed interest by allocators in hedge fund managers, shortly after the Covid-induced market implosion in the spring of 2020. “This move by many allocators proved profitable as hedge funds performed well over the remainder of the year,” he adds.
According to Seibald, the key service that fund managers are currently asking for is capital introduction. “The reality is that hedge fund managers want more capital to manage and are, for the most part, requesting more and more assistance from their prime brokers.”
In addition, managers are increasingly enquiring about trading and clearing markets around the globe and outsourced trading. To meet demand, Cowen launched FX trading last year and fixed income outsourced trading in 2021. “These business lines are particularly of interest to larger and more established funds, which provides us the opportunity to broaden our client profile,” Seibald comments.
On the client side, Cowen is seeing new launches continuing at a decent pace, with a number of very high-profile launches with substantial sums of capital already starting this year, and the flow of talented portfolio managers coming out of larger platforms is continuing, as they look to “control their own destiny,” Seibald concludes.
Jack Seibald, Managing Director, Global Co-Head, Prime Brokerage & Outsourced Trading, Cowen
Jack Seibald is Managing Director and Global Co-Head of Prime Brokerage & Outsourced Trading. Seibald co-founded Concept Capital Markets, LLC and, until its acquisition by Cowen, served as a Managing Member of the firm. During his tenure with Concept Capital, Seibald was involved in the management of all aspects of the firm’s operations, with a particular emphasis on business and client development and legal matters.