Bryan Messer stands at the intersection between technology and finance, combining an engineering degree with a varied resume that includes stints at companies such as Microsoft, Enron and Barclays. After growing up in Scotland, Messer worked in London and New York and then went to Hong Kong three and a half years ago with Goldman Sachs Principal Strategies (GSPS). However, Goldman ended up closing the proprietary trading group in anticipation of the Volcker Rule, so Messer joined Azentus Capital, the hedge fund founded by his GSPS colleague Morgan Sze, as the chief technology officer. This year, Messer launched his own firm, Messer Fund Services, which provides hedge funds with technology solutions for the front, middle and back office. The firm’s focus lies primarily on Hong Kong and Singapore for now, but Messer sees a need for hedge funds to use improved technology worldwide, and he hopes to expand to Europe and the U.S. Why did you decide to start this firm?
BM: Over my time working at one of the large funds here (in Hong Kong) since launch, I noticed there was a definite gap in the market between the various vendor products. And I had peers at other hedge funds, and I talked to them, and they had the same issues. Generally these issues were things like data management, data warehousing, investor reporting, and I thought there’s a real opportunity here. So in May of this year I launched the company. I exited from my last place [Azentus]—they were very supportive—and transitioned out. From there, I started to explore the market a bit. I had quite a lot of interest initially around both our stock borrow product and our data warehouse. The real focus was being in that data management and reporting area, and the stock borrow product is something that overlaps with that as well, because as part of data management we have a reconciliation tool. So that became kind of the engine behind the stock borrow management and that can feed into the data warehouse.
What are some of the inefficiencies that the data management product addresses?
BM: It’s a couple of things. It’s operational efficiency so that a fund can scale up without having to add additional resources. It’s letting the operations teams get on with what they’re good at—where they add value, not manually reconciling files that they have to download from a prime broker or a custodian and then run the report in an existing system and try and match them up. It’s trying to bring that whole process together so that all they’re seeing is exceptions. And then they can add their value by looking into that and understanding what the problem is. And the second half of the data management is as investors are demanding more transparency into a fund, then someone in investor relations or whoever is taking the call should have access to the information they need to talk to an investor without having to say, “I’ll call you back.” They should be able to get this information straight away. So that was the real vision behind the company—that we wanted to empower people so that they had this information.
How does the stock borrow product work?
BM: The stock borrow product takes care of all the reconciliation with counterparties. It will track the borrow rates and will let you know when you’ve been re-rated. It will alert if you borrowed a stock that has a dividend and the dividend date is approaching, because there’s various taxes in different countries in Asia, and it’s sometimes beneficial to return that stock rather than keep it over the dividend period. Stock borrow can be quite a big-ticket item for a long/short fund, so it just helps you control the cost and make sure you know where you’re spending and who you’re borrowing with and making sure you’re returning borrows when you should.
Are these problems specific to hedge funds in Asia or is it a worldwide issue?
BM: I think the data management problem is something worldwide. The stock borrow is probably more appropriate to Asian and maybe European markets. I think the U.S. market for stock borrow is very different. It works off a rebate model, so it’s not the same as having to pre-borrow as we have to in Asia. (And naked short selling is more restricted in Asia.) So the stock borrow product is more Asia-focused. The data warehouse, what we call the Data Cube, is definitely a global solution. I talked to peers in the U.S., and I found that the guys in the big, big funds are building their own [solutions] internally. and the smaller funds are having the same issues that we see here in Asia.
What do you see as the outlook for hedge funds in Asia versus Europe and the U.S over the next three to five years?
BM: I think the theme is going to be the same globally. It’s going to be more regulation, more reporting, more compliance, more transparency, because people want to know how their money is being invested and be able to find out exactly where that is.