I.A. Englander has agreed to transfer its managed account and prime services platform (MA&PS) to Concept Capital Markets in a deal that sees Concept assuming I.A. Englander’s employees and accounts from MA&PS without assuming any of their liabilities or exchanging compensation.
I.A. Englander decided to transfer the business after deciding that its resources were better aligned with other parts of the marketplace, such as their derivatives brokerage business. “Concept Capital has continued to demonstrate a commitment to the prime brokerage business through investments in personnel and technologies that combine to deliver a comprehensive set of solutions for investment managers and those that allocate to them,” says Stephen Tobias, CEO of I.A. Englander. “Our clients could potentially benefit from these solutions and our employees may be better able to extend their reach into the alternative investment manager space with the additional tools available to them.”
Joining Concept Capital from I.A. Englander will be Harry Freda, Nick Rizzi and Bob Chicoine in the Purchase, NY branch, and Matt Pringle, Georgia Goodman and Bob Wibbelsman in the Santa Monica, CA branch. The employees will remain in those locations. Additional personnel and account transfers between the firms may take place once details of the transaction are finalized.
Jack Seibald, CEO of Concept, describes the assumption as a “bolt-on” to their existing prime services business, with the main benefits coming from adding the personnel and accounts, rather than a technology benefit, as Concept has already invested in systems to handle these accounts.
The transaction “means that being in the prime brokerage services business takes a lot more than just being a broker-dealer; it means having the personnel and technology in place to provide a wide variety of services to what is an increasingly wider range of needs among the managers of alternative investment products,” says Seibald. “In the bigger context it means that unless you’re willing to commit meaningful amounts of capital to develop technologies and incur meaningful amount of payroll cost to attract the right types of people who understand and can execute the needs of alternative investment mangers, it’s going to be very difficult to grow in this business.”
After the transfer to Concept, most of the MA&PS clients will still be able to keep their accounts in custody at the same clearing firm, and they can continue to use the same trade execution systems they’ve been using. Clients’ primary contacts on all matters related to their accounts will also remain the same. Concept will also transfer clients’ accounts to another clearing firm if it’s in the client’s best interest to do so.
Seibald says that most of the acquired accounts have a similar makeup to Concept’s existing accounts, which are primarily alternative investment managers running hedge funds, managed accounts, or often both, and he sees continued growth in managed accounts
“In our own business, to say anything other than we’ve seen an explosion in managed accounts would be an understatement…Whether that’s a direct result of the financial crisis, the Madoff scandal, [etc.], or if it’s that the technology has evolved and made it materially easier to allocate in this manner both from the perspective of the mangers and the allocators, or a combination of those things, it seems to us that it’s likely to continue to go in that direction.”
Seibald also adds that over the last few years, “it’s the exception if the manger is just running a fund. It’s the norm that the manger is running a fund and managed accounts alongside that.”
“A key driver in that—and where Concept is on the frontier—is wrapping technology around that,” says Mark McGoldrick, managing director at Concept. “For many years, for managers to go outside of their LP was a huge investment…but the technology has caught up. Now it’s about investment managers having product to offer. Having the ability to have multiple different product offerings for a diverse institutional investor base is key.”
Concept Capital Assumes I.A. Englander's MA&PS Business
I.A. Englander has agreed to transfer its managed account and prime services platform (MA&PS) to Concept Capital Markets in a deal that sees Concept assuming I.A. Englander’s employees and accounts from MA&PS without assuming any of their liabilities or exchanging compensation.