Considering Citigroup are one of the newest prime finance houses on the Street, they’re going a long way to establishing themselves as a major force. Key hires including Christy York coming in to run the European capital introduction team and Martin Visairis heading up the equivalent unit in Asia are giving Citi some ballast: indeed, for Asia itself, there are now over 80 prime brokerage staff, with the US bank focusing its recruitment on OTC derivatives, client services and futures.
“We’ve only really been around since 2008 when we consolidated the European and US platforms into an international platform. We struggled in ’09 with Citi’s credit issues and to gain any kind of momentum with the business between Q1 2009 and mid-2010. It’s been since mid-2010 that we’ve seen a great deal of momentum in client acquisition. People now see the renewed strength of the Citi franchise,” explains Nick Roe (pictured), Citi’s Global Head of Prime Finance and Futures.
Roe is very much process-orientated. He enjoys devising strategies and executing them effectively, and in that sense has been a driving force in putting Citi’s prime finance business on the map. “The focus has been around creating consultancy services on a global basis, creating the distribution and really working on value-added services,” explains Roe with Mark Harrison, European Head of Prime Finance adding: “There’s not a single new client meeting where capital introduction doesn’t come up. It’s a very important part of our offering and that’s why we’ve tried to differentiate ourselves through key hires like Paul Harvey who ran GLG’s fund of funds for eight years.”
Whilst equity strategies are the predominant focus at Citi, they also have a strong fixed income capability, helped by the fact that they launched an OTC clearing platform last year, giving them a jump on their competitors. “I think that’s going to be an important part of the business in a year or two’s time,” opines Harrison.
Citi’s prime finance business, unlike other prime brokerages, is not a part of the equities division. This gives them full reach across capital markets rather than being aligned with any particular division, helping them avoid trading-related issues suffered by other capital market products. “Being a completely separate division means we can manage our own expenses and destiny, as it were, in terms of strategy and execution,” says Roe: a major advantage for someone who thrives on new ideas and implementing them.
Back in late 2008, Citi launched a prime custody product called AlphaOne, which it created for Danish pension fund ATP. According to Roe the overall level of interest amongst hedge fund clients was limited. Even though they felt it was a good idea, fund managers’ overriding concerns with credit didn’t just stop at segregating assets. Nevertheless, Citi have seen a lot of pension funds approaching them on the back of the managed account platform, Ivaldi Capital, to which they act as prime broker, administrator and custodian.
“Our internal consultancy group helps clients reorganise their internal infrastructure so that they can create either internal hedge funds or an alpha allocation process within a full execution prime broker custody service. This has led us to developing Ivaldi and ATP’s Alpha platform,” explains Roe.
“I think this is where Citi really is unique,” adds Harrison. “There are those that offer the full range of services from execution and prime finance through to administration but I don’t think there’s anyone else that can put all those pieces together like we’ve done for the likes of ATP. It’s certainly a successful growth area for us.”
When asked how well Citi was doing at taking market share from its competitors, Roe says that it’s probably less from Morgan Stanley, whilst Goldman Sachs are being very selective about the business they choose to be in, adopting what he calls a “platinum card approach”, but in terms of revenue growth, Citi is up year-on-year.
“Most other brokers would be hard pushed to say ‘we’re taking market share’. Citigroup is seen as a relatively safe organisation now. In terms of conversion of numbers of accounts the pipeline is looking healthy. Our Asia prime brokerage business has doubled its balance this year. That shows where the momentum really is,” says Roe.
