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Investor needs drive managed account growth

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BNY Mellon’s HedgeMark: Best Managed Accounts Platform – Institutional investors are changing the way they access the hedge fund asset class. Their desire for increased control, customisation and transparency is driving an increase in the use of managed accounts.

“We believe we are still in the early innings of the shift to managed account structures,” comments Joshua Kestler, Global Head of HedgeMark, “Market volatility and macro uncertainty will drive an increase in the use of managed accounts as a means to maintain tighter control of assets and increased transparency which allows investors to more effectively manage their portfolios from a risk and investment perspective through turbulent times.”

The eventual outcome of the US Presidential Election as well as the persisting impact of the Covid-19 pandemic are just two issues driving the potential for increased volatility going into 2021. Also given the anticipated upheaval, Kestler adds: “We would also expect to see continued interest in implementing managed account structures for co-investments and opportunistic trades resulting from market dislocations.”

Investors are currently facing various pressures which are driving them to change the way they invest in hedge funds. “Whether it is a pension plan that is under pressure to reduce manager fees and access hedge funds in a more controlled manager or a fund of funds business that needs to deliver flexible and customised solutions to its clients, the demand for managed accounts is greater than ever.”

However, he notes that launching and operating a managed account platform requires a significant amount of expertise, technology and people. This is driving the appetite for investors to partner with third parties in this regard.

Kestler comments: “The vast majority of institutional investors who seek to invest through managed accounts choose to outsource the set-up and operations of their platform to a provider like HedgeMark. Clients can leverage our scale, expertise and technology allowing them to bring their platform to market quickly and efficiently.”

As the managed account industry continues to mature, investors are becoming more focused on using the daily data made available through the structure. Kestler outlines their changing needs and demands: “We see clients use transparency to improve risk and investment management of their portfolios and to deliver products such as sustainability and ESG funds. We have also seen an increase in demand for operational data including margin, counterparty exposure and financing rates. 

“HedgeMark has designed a flexible front-end reporting system which allows us to capture the desired data and present it in a user-friendly manner to our clients. We continue to invest in ways to further enhance our technology to meet client needs.” 

Despite the unusual and volatile nature of 2020, the drivers of growth for the HedgeMark business have been quite similar to recent years. The firm’s success continued to be driven by a combination of existing clients adding funds and assets to their managed account platforms as well as new clients launching managed accounts for the first time.

Kestler concludes: “We seek to deliver excellent client service and an outstanding overall client experience to the users of our managed account platform.  We want to make it as easy as possible for our clients to invest through managed accounts and to help them maximise the benefits available through this structure. By doing so, we are helping our clients grow and improve their business models and achieve their investment objectives.” 

Joshua Kestler
Global Head, HedgeMark

Joshua Kestler is the Head of HedgeMark, BNY Mellon’s Dedicated Managed Account platform and is responsible for overall management of the business. Joshua joined HedgeMark in 2012 and served as President and Chief Operating Officer. Joshua was previously employed by Deutsche Bank where he most recently served as head of the dbalternatives managed account platform operations in the US. Prior to holding that position, Joshua was Chief Administrative Officer for DB Advisors Hedge Fund Group, the division of Deutsche Bank responsible for the investment management and operations of Deutsche Bank’s fiduciary single manager hedge fund and fund of hedge funds business. 

Benjamin Yaffee
Head of Business Development, HedgeMark

Benjamin Yaffee leads business development and manages client relationships for the firm. Additionally, Benjamin oversees the firm’s broker-dealer, HedgeMark Securities LLC. Prior to joining HedgeMark in 2012, Benjamin worked at Nighthawk Partners Inc. where he was Senior Vice President before becoming President and was responsible for sourcing hedge funds for distribution and led distribution efforts in North America and Europe. Benjamin worked with numerous hedge fund strategies and raised capital from institutional investors including insurance companies, family offices, pension consultants, funds of hedge funds, foundations and endowments.

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