For a growing hedge fund or asset manager, expanding the investable universe is becoming a prerequisite for fundraising and retention. Institutional allocators are no longer satisfied with a narrowly focused domestic equity mandate. Capital allocators are drawn to managers who can be opportunistic across geographies. For managers, the trend is clear. To stay relevant in institutional portfolios, they must expand their exposure offshore. What is the best way to do that?
Global Asset Outsourced Trading
When an investment manager expands its investible universe – whether it’s in one asset class or many – to span regions outside of its home, the complexity and costs can rise substantially. First the manager needs to assess the firm’s internal talent pool and ensure it has regulatory mastery of the new region if it wants to open a regional office. Second, the manager will need to consult attorneys both locally and abroad, to ensure it meets regulatory requirements to do business as an asset manager in that region. Finally, the manager needs to have the internal HR and infrastructure to hire and retain talent that is either local to the region,or working overnight hours to transact in that market. Overnight traders introduce a whole different element concerning burnout and retention as well as the firm lining up reliable backup coverage for vacation and sick days for that trader. In short, it can be a complex endeavor for a manager who just wants to focus on making money for investors.
A Clear Path Forward: Global Outsourced Trading
Firms across the street offer outsourced trading for global managers, typically with restrictions by asset class or specialty by region. As a registered broker-dealer, Meraki Global Advisors has the ability to solve your outsourced needs across every major global security in every major/ emerging market. With traders located in Utah, New York, Hong Kong and Australia, we’re able to provide seamless 24×6 coverage to trade any asset in the world. Our trading team is composed entirely of seasoned former buy-side professionals with on the-ground experience in major global markets—Singapore, England, Australia, Hong Kong, India, and the United States—and a proven track record trading across multiple asset classes.
The Value of Meraki’s Outsourced Trading Desk
When computing the costs that a global investment manager may face when creating an in-house trading desk, the costs can quickly escalate. Legal fees, compliance and back/middle office personnel, two traders, 24×7 managed IT and additional Bloomberg terminals are only the starting point. Adding human resources and benefits, the costs can quickly top seven figures from even the most cost-conscious investment managers.
Meraki is 28(e) eligible and allows investment managers the choice of paying trading fees from the operational budget or from the soft dollar budget. In addition, Meraki can either offer its traditional, fully integrated trader model or now offer a lower-touch, lower-cost option that allows a manager whose priorities lie outside day-to-day trading minimal costs and only interact when they deem it necessary with a human trader.
This cost savings can translate into hiring additional investment research team members to further the alpha generative function of the firm. Like the businesses they research, the investment manager is maximizing his firm’s ROI while focusing on his core competency of alpha generation rather than talent management.
Outsourcing is the past and the future
For much of our careers, outsourcing has been a growing industry, starting initially overseas in specialized sectors. Over the past 25 years, outsourcing has become far more common when business owners look at the costs and headaches associated with managing non-core competencies. Outsourced trading, for an alpha-generating investment manager, makes common sense when investors think about the ideal way for a portfolio manager to divvy up the hours in his day.
If you want to learn more about outsourcing or how to find and select the right partner, download our free whitepaper that highlights the five key things to keep in mind when expanding your trading capabilities through a partnership with a provider.
