HFC’s Stefan Nilsson decided to have a chat with Invast Global’s CEO Gavin White about Invast’s expanding multi-asset prime brokerage business.
Asia-Pacific is in your DNA: Invast Global is headquartered in Sydney, your parent company is headquartered in Tokyo and you have recently opened an office in Hong Kong. How important is Asia-Pacific to your business?
Yes – our parent company has been a licensed financial services firm for over 60 years in Japan, so we have a long-standing affinity with the Asia-Pacific region. Having said that, our reach is truly global and our revenues are generated broadly across the world. We expect the Asia-Pacific region to be a big driver of our growth over the next 3-5 years. Hong Kong and Singapore have long been jurisdictions with strong asset management industries. There is a distinct entrepreneurial streak inherent in the culture of residents of both cities. With regard to the hedge fund industry, this translates into a healthy start-up and emerging manager scene. We intend to continue making a big commitment to serve this segment.
Do you mainly target existing hedge funds looking to switch prime brokers or are you more focused on signing up brand new fund launches?
Traditionally we have focused on serving the needs of the start-up and small/emerging managers. These are managers who have had a difficult time meeting the demands of the big bank PBs with minimum commission hurdles, etc. The bank PBs are being deeply affected by tightening regulatory regimes, particularly the Basel and MiFID regimes, which look to be with us for the foreseeable future. We focus on the specific needs of this end of the industry and our flexibility and non-bank status allows us to be more innovative toward this segment than the bank PBs can be. It is a real privilege to step into this space as the big bank PBs depart. Without a strong start-up and emerging manager segment, the future of the asset management industry is at threat. After all, the start-ups and emerging managers are the industry heavyweights of the future. We like to think we are playing our part in promoting a healthy, sustainable industry by helping nurture the smaller end. Having said that, demand from medium to larger managers has surprised us. It shows that the big bank PBs are undergoing significant restructuring programs, which is having the effect of ratcheting higher the requirements managers need to meet before being accepted onto the big PB platforms.
What do you think makes Invast Global’s offering stand out in a crowded prime brokerage market?
This is quite simple – we’re “high-touch” in the aspects of our client’s business where they want us to be, and “low-touch” in the areas that everyone finds painful. We’ve worked incredibly hard to ensure that our documentation, onboarding, KYC and DD processes are as efficient and automated as possible. But if a client calls up our coverage team at any time of the day or night, that call gets answered immediately by someone knowledgeable and professional who will make sure the client gets what they want, quickly and without fuss. We are committed to contributing to the growth of the hedge fund industry by nurturing the smaller end of the spectrum. We offer very competitive fees, with no monthly minimum commissions – something that is appreciated by our smaller fund clients. We have a specialist team of prime services experts who support the multi-asset needs of our clients – there is no transferring between prime services teams who are segregated along asset class lines. Clients can trade a broad range of OTC instruments, as well as a global suite of exchange-traded instruments, all from the one account and one collateral wallet. Stock borrow is one of our strengths, due mainly to the fact that we enjoy equity PB relationships with two of the largest PBs on the street, complemented by strong borrow relationships with other players. Overall though, we get most feedback about the quality of our client service. Every client is crucially important to us and we treat them all accordingly. We thrive on coming up with simple solutions to our clients’ complex needs. Every client is different, and we aim to adjust our offering in response to the specific needs of each client.
In addition to your vast experience as a broker, you have also worked for a global macro hedge fund. How important do you think that experience is for you in order to better understand and serve your hedge fund clients in your current role?
Yes – I have an intimate understanding of what it takes to get a fund up and running. It is not easy – especially if you are small and have limited staff numbers. The assistance you receive from vendors and service providers is crucial – mainly because your own internal resources are generally stretched pretty thin. The unfortunate fact is that the end of the market that needs the bespoke, flexible support, is precisely the end of the market that the big PBs are pulling away from. Start-up and emerging managers are often caught in this trap. There is a palpable sense of relief amongst many of the clients we onboard, when they realise the quality and breadth of our offering – and particularly how we have streamlined the onboarding process and devote resources to take the workload off the client. Most of our clients had been expecting to migrate to a retail broker upon being offboarded by their bank PB. They are pleasantly surprised to find that there is an offering like ours which is world-class, institutional quality, but at a reasonable price point and all-encompassing for their needs. We collaborate directly with our clients’ administrators and custodians to ensure processes are completed with the minimum disruption to the manager themselves.
Have you seen any change in recent years regarding what hedge funds and other clients in the Asia-Pacific region demand from their prime brokers?
A strong theme has been a growing demand for outsourced execution, which we have been providing for clients on a 24-hour basis for a few years now. We have begun developing bespoke execution algorithms to really give clients “remote control” of their executions. This is backed up by a highly skilled manual execution team operating around the clock.
You are a founding sponsor of the Hedge Funds Club’s expansion into Australia this year. What’s brewing in the Australian hedge fund industry?
We are very excited that the Hedge Funds Club is coming to our home town. We have had a long association with the HFC events and it has been a very valuable relationship for us, in many ways.
There has been a lot of movement in the asset management space in Australia and we believe there is great potential for the industry to grow strongly as a centre providing world-class asset management with particular expertise in the Asia-Pacific, a part of the world experiencing continued strong economic and demographic growth. We want to help fund managers get established down here and assist them in showing the rest of the world the quality of Asia-Pac managers. Partnering with the Hedge Funds Club to generate interest in Asia-Pac managers seems like a great idea to us.