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Cowen Prime Services expands into London under stewardship of Kevin LoPrimo

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Cowen Prime Services prepares to launch its platform in London in the coming weeks with prime brokerage and outsourced trading, among the high-touch services that will be on offer to European hedge fund managers.

London is the latest focus of attention for Cowen Prime Services as it looks to expand its network beyond North America. 

“We believe that there is a real opportunity for Cowen Prime Services to enter the European market and be successful. Since Concept Capital Markets LLC was acquired by Cowen Group, Inc., last September, we’ve continued to invest heavily in the business,” comments Mike Rosen, Cowen’s Global Co-Head of Prime Brokerage.

To spearhead this drive into Europe, Cowen hired Kevin LoPrimo (pictured) in June as Managing Director, Head of International Prime Brokerage. Prior to joining Cowen Prime, LoPrimo served as Managing Director, Head of Fund Services and Equity Finance at Global Prime Partners and was responsible for managing the creation of the first Europe-based ‘boutique prime broker’; more commonly referred to as an Introducing Broker in the US. 

“We’ve hired six staff already, including Kevin, and this is the group we plan to launch the business with this autumn. Cowen International Limited has been an FCA registered broker-dealer for a number of years and as a result of that we are prepared and plan to start onboarding new clients in September” adds Rosen. 

In the US, Cowen Prime Services uses a multi-custodial clearing model to the benefit of its hedge fund clients. Currently, it has clearing relationships in place with Pershing, a division of BNY Mellon, Merrill Lynch, a division of Bank of America, Goldman Sachs and Chinese bank, ICBC. 

The aim, says Rosen, will be to replicate the model of using a diversified group of clearing partners  in London to best satisfy client needs, while  using an a somewhat different  legal structure that is consistent with how business is done in Europe. 

“It is going to be a robust offering that will include all of the prime brokerage services that are necessary to a hedge fund manager. A host of technology solutions will be provided to clients.  Additionally, we are going to offer expanded outsourced trading capabilities on a global basis. We already have two outsourced traders in place in London” confirms Rosen. 

This will allow clients to avail themselves of trading support available on a near 24/6 basis. The team will execute trades at the opening of Europe, pass the book on to the New York team. They in turn will pass it on to the San Francisco trading desk, where it will trade the opening of Asia, before sending it back to London to pick up the close of Asia. 

“We are targeting managers with between USD10 million and USD500 million in AUM who trade primarily listed instruments on both a cash and synthetic basis – whether it’s bonds, equities, futures, options.  We will provide leverage where appropriate and engage in other equity finance and stock loan functions.  We would expect the majority of our clients to be in the long and short equity space, but are prepared to service all asset classes,” says LoPrimo, who continues: 

“We’ve already benefitted from a number of incoming inquiries despite not having officially launched our business. The announcement that I was joining an established entity such as Cowen has led to that initial wave of client interest. The sales team in the US also has a lot of contacts here in London, which will help us to get things lined up when we officially go live in the coming weeks.”

The outsourced trading capability is an extra string to Cowen Prime’s bow and a key differentiator within the boutique prime space. At a time when outsourcing, as a concept, is gaining greater traction among managers of all sizes, this will give Cowen’s clients the benefit of an experienced buy-side caliber trading desk with relationships across a number of brokerage firms with an added ability to offer broad insights into stocks and sectors.

“Outsourcing has become more prevalent, not just in our industry but in all industries. I think it’s something that is here to stay. Everyone is focused on being as productive as they can be, whilst at the same time maintaining the highest standards of care. By outsourcing trading and financial reporting, in addition to other services to a firm like ours, investment managers are able to achieve this.   

“The two traders we’ve hired in London previously worked at Brevan Howard and Tudor Investments, in addition to a number of other extremely reputable firms, and are exceptionally talented at what they do. It would be difficult for some of the funds that we will be targeting for our services to initially have access to traders with the experience of those supporting our effort.  It is an opportunity for fund managers to focus their efforts on generating alpha through the investment process and not get distracted from that primary goal. That’s what will allow them to be successful at raising capital, which is every manager’s primary objective,” comments Rosen.  

In addition to the equity expertise of the trading team, Cowen Prime Services is able to leverage Cowen Group’s wider equity research group and is just one of several synergies that last September’s acquisition created. Another notable benefit is the strength of Cowen Group’s balance sheet. Naturally, there are plenty of prime brokers that offer similar benefits, but many are self-clearing entities. Within the boutique prime space, which utilizes an omnibus model by netting all managers’ trades into a single account for execution purposes, Rosen believes “we have a unique offering”.

“The notion of using an “intermediary” hasn’t been as popular, historically speaking, in Europe, but one of the reasons we were so keen to bring Kevin on board is because he was one of the first to establish and use the boutique prime model at his previous employer.” he further adds.

As the biggest prime brokers continue to retreat to support the largest hedge funds, largely in response to Basel 3 regulation and the need to improve overall return on equity, LoPrimo is excited by the larger target audience that Cowen Prime Services will be able to go after in Europe. 

“Because of the size of our firm, we see ourselves creating an extremely credible upper-mid-tier prime brokerage offering; and there are not many doing that right now,” opines LoPrimo. 

He continues: “We will probably focus on additional services such as capital introduction a little further down the line. It will be used judiciously and our effort will be sized appropriately.  We don’t plan to offer the service to everyone that becomes a client.  It will mirror what we have done in the US, it will have to be a smarter and more selective offering that’s driven by the requirements of potential investors and emphasizes managers that have practiced their investment strategy before and can document track records, either in their current structure or a previous one.”

Indeed, the very essence of Cowen Prime’s platform is to help managers become “Institutional” in caliber. Rosen echoes LoPrimo’s point by saying that its capital introduction services will be geared to those managers who are institutionally investable.  

“By wrapping a number of  services – shadow reporting, real time risk reporting multi-custody clearing relationships, outsourced trading, plus others  – we are helping managers to become operationally sound and  meet  the requirement of operational due diligence processes much sooner than if they tried to do it independently.   

“There is a lot to offer, and the firm is certainly in an investment mode. That fact alone sets us apart from other players in the space.” concludes Rosen. 

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