8th Apr 2020 - 8:08pm

Trading operations being outsourced

Submitted By Mark Kitchen | 08/04/2020 - 8:08pm - Cowen Prime Services LLC (prime services division of Cowen Inc.) Contact Form Contact Company

Cowen Outsourced Trading: Best Outsourced Trading Solution – As hedge fund managers continue to focus on reducing cost and fostering a greater emphasis on their core competency, the industry is seeing a move as existing funds explore outsourced solutions to either supplement their internal trading operations or at times completely replace them.

Jack Seibald (pictured), Managing Director at Cowen, says the firm has experienced this trend directly, onboarding some notable current hedge funds with this service. “The dramatic changes taking place in the structure of the markets, particularly the equity markets, means far fewer issuers now trade publicly, compared to a decade ago. As more and more daily activity is driven by electronic and passive strategies, portfolio managers are increasingly questioning the value of building or operating internal trading desks, when they have the option of outsourcing that function to experienced teams with a global footprint,” he comments.

Seibald adds: “With increasing frequency, we’ve seen investment managers look to outsourcing as a means to reducing operating costs as well as fostering a working environment that enables a greater focus on portfolio management. Given the ongoing contraction in fees that allocators are able to negotiate with fund managers, we anticipate that a focus on costs will continue for the foreseeable future.”

The broadening acceptance of outsourcing among investment managers, and perhaps more importantly, those investing with them, has been a key driver of Cowen’s growth over the past year. The firm’s Outsourced Trading service, which encompasses a comprehensive set of solutions beyond trade execution, has expanded significantly. Throughout the year it has added personnel across the globe and onboarded many new clients.

Seibald notes: “We came into 2020 with expectations for a sharp increase in our Outsourced Trading business. And while it’s still early in the year, we are very encouraged by the success we’ve had so far in winning new mandates from both new launches and established investment management firms.” In light of this, Cowen has added to its outsourced trading team in London and will shortly be announcing a significant expansion into an additional asset class to further differentiate its offering.

Expounding on the challenges hedge fund managers face, Seibald comments: “Increasingly, our capital introduction team is seeing growing interest in strategies with idiosyncratic return characteristics, with far less interest in more traditional long-short equity strategies.

“Active managers must distinguish themselves and demonstrate an ability to generate returns other than from beta, as these strategies are increasingly commoditised and inexpensive for allocators to employ themselves.”

On the ongoing challenge to sustain the calibre of service delivered to clients, Seibald observed: “As we’ve continued to build out our team globally and across asset classes, our top priority has been to add people with deep experience and, just as importantly, a like-minded approach to helping clients to outperform. While investments in technology and support services are critical to deliver a great customer experience, Outsourced Trading is still a people-driven service. Effectively managing those client touch points will remain critical to the success of the business.” 

Jack Seibald
Managing Director, Global Co-Head of Prime Brokerage and Outsourced Trading, Cowen

Jack Seibald is Global Co-Head of Prime Brokerage and Outsourced Trading, Cowen Inc. He was a co-founder and managing member of Concept Capital Markets, LLC until its acquisition by Cowen Group, Inc. in September 2015. He has been affiliated with the firm and its predecessors since 1995, and has extensive experience in prime brokerage, outsourced trading, investment management, and research dating back to 1983.

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Mark Kitchen

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