Family Offices Getting More Direct In Managing Hedge Fund Money - GPP

Tom Burroughes

26 March 2013

Family offices are looking to develop more in-house investment capability and that includes hedge fund management, a trend that is boosting the business of Global Prime Partners, the London-based firm told this publication recently.

GPP provides services to hedge funds in the sub-€100 million region – funds that might otherwise not interest the bigger prime brokers. And this firm, which was established over four years ago, gets a close view on trends in the market and also on what wealth managers want to do in the $2 trillion-plus hedge fund industry.

“Some of these are also bringing over in-house investment managers and therefore looking for the sort of service we have to offer,” Kevin Loprimo, global head of hedge fund services at the firm, said in an interview at his smart offices in Old Park Lane. “We have been contacted by families looking to invest in the same way that a big bank does. Being a small firm we are also able to be very high-touch in terms of service.”

“I am seeing more family offices hiring directly to invest into the market, and more people coming out of the larger firms and starting their own businesses. We are winning clients that would not be making the minimums to be charged ,” Loprimo said.

Some of the background “noise” in the sector has also been more positive than of late. According to data from Chicago-based tracker Hedge Fund Research, its HFRI Fund Weighted Composite Index is up 2.79 per cent in the first two months of the year. Over the past three years, the index has chalked up an annualised performance of 4.57 per cent. So maybe after what has been a period of muted gains, the sector is starting to shine again. According to the Financial Times, the sector is due for its best performance in years. That would certainly be good news for Loprimo and his colleagues.

A native of the US East Coast, but who has lived in the UK for the past 17 years or so, Loprimo and his colleagues are looking to expand. Already, GPP has signed 15 new accounts in 2013 so far and he expects to sign up 15 to 20 more in the next six to eight weeks.

“Our trade volumes are increasing; this year, we are up about 35 per cent. Our leverage is up and we are lending a bit more for those who want to borrow,” he said.

What sort of hedge funds are coming into the market?

“We are seeing continuing offerings in the global equity long/short space,” he responded. Loprimo said one theme is where a fund looks at firms with a dual listing in different time-zones to exploit the price discrepancies and moves that can occur.

Some regulatory developments have increased the minimum sizes for funds to be viable in the market, he said, but the sub-€100 million market is not really affected by this, he said.

The economic outlooks remains uncertain – at the time of writing there had not yet been a deal agreed about the debt morass in Cyprus – and hedge funds may yet experience a rough patch. But at least for the moment this sector has the look and feel of a business that is recovering from a tough time, which will be of interest to a wealth management industry where making absolute returns, despite problems, is still a big deal.