Industrial Evolution: How new trends are reshaping the prime brokerage offering

‘Industrial Evolution: How new trends are reshaping the prime brokerage offering’ was published by Hedgeweek featuring Chris Elliott, Head of European Prime Brokerage Business Development at Cowen, and Jack Seibald, Managing Director and Global Co-head of Prime Brokerage and Outsourced Trading at Cowen, and other thought leaders.

New trends – from technology and data to digital assets and ESG – are transforming the way hedge fund firms invest and operate. What new innovations, products and services are prime brokers offering to keep pace with this evolution?

Abstract of commentary from Cowen

Noting how Cowen has been among the early movers in the SPACs space, as well as in cannabis stocks and cryptocurrencies, Chris Elliott, Head of European Prime Brokerage Business Development at Cowen, says: “We continue to evolve and innovate in keeping with the entrepreneurial spirit that you would expect from a boutique quick moving investment bank.”

Jack Seibald, managing director and global co head of prime brokerage and outsourced trading at Cowen adds: “One area in the US where we do have the ability to touch much larger entities is in specialty asset classes – cannabis stocks being a major example.

“We are the only US-based prime broker offering a cannabis solution that ranges from execution to custody and clearance. That’s a major differentiating capability relative to the big bulge bracket firms.

“It means that we’ve served as the prime broker to most cannabis-dedicated hedge funds over the past few years, and more recently we have become the prime broker to some very large hedge fund platforms that have carved out a portion of their book to allocate to the cannabis space.”

Seibald says the ramp-up in Cowen’s outsourced trading business, which has seen it add fixed income and FX products in recent years, has also taken it towards “a different tier or calibre” of client, such as those typical of larger, bulge bracket outfits.

He explains: “We’re doing the outsourced trading for those larger funds, and when they move towards an incremental prime solution – whether it’s for a specific need or whether it’s just to diversify – we are increasingly there in the mix because we do have the capabilities to service them in much the same way as the bulge brackets do.”

Transition

In a number of instances in recent years, Cowen has transitioned some of its outsourced trading relationships into at least partial prime brokerage relationships, Seibald adds.

“Outsourced trading for us as a firm has been a game-changer over the last decade,” he observes.

“It’s a value-added service that has become increasingly appealing to a much broader audience within the investment management community. It used to be very centered on hedge funds – smaller to mid-sized hedge funds – but it’s now taken on a life of its own to the point where very large hedge funds and, more importantly, the traditional investment management organisations – like family offices, endowments and foundations, and even large investment advisory firms – are either looking at or have taken on that service, for a variety of reasons. One is cost, the other is expertise. That’s relatively difficult to replicate unless you dedicate an enormous amount of resources to it.”

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