Inducted as a GC Industry Legend at last November’s New York awards, Eamon McCooey has been involved in capital markets for 34 years, the first 14 of which were spent mainly in operations, middle-office and risk management roles in the derivatives business. “My first two jobs at Kidder Peabody and CIBC were spent on the derivatives side, mostly in non-front office roles,” says McCooey. “What was nice about those roles was that I was getting in on the ground floor of building out new businesses. At Kidder Peabody in the mid ’80s, derivatives were just starting to emerge as a product class. I was offered an opportunity to start building out the operations to support that business; likewise, at CIBC, I was building out a financial products team coming in on the ground floor. Those were two exciting opportunities in a very dynamic, rapidly growing business.”
In 2000, with CIBC looking to scale back its ambitions in the capital market space and repatriate certain businesses to Toronto, McCooey began to explore other opportunities in derivatives. It was then that Jim Rowen, a friend and colleague from his days at Kidder Peabody – and a well-known industry figure – asked him if he might be interested in joining him at Deutsche Bank to help build out the bank’s prime brokerage business. “I didn’t know much about prime brokerage, but in my role at CIBC, I had started to see the greater influence hedge funds were having in the capital markets,” he explains. “I decided to switch careers and move out of the derivatives space, which was still a very exciting space, and move into prime brokerage.”
McCooey moved over to Deutsche Bank to work with Rowen in building out the prime brokerage platform. “Prime businesses are very much infrastructure platform businesses,” he says. “I cut my teeth there, building out the infrastructure.” By the time he left Deutsche Bank in 2013 to join Wells Fargo, PB had grown into a multi-billion-dollar business for the bank. “I’ve been very fortunate in my career; in the four firms I’ve worked in my 34 years in this industry, I’ve always been on the ground for new builds,” he says.
Over his time in prime brokerage, McCooey has witnessed both stability and revolution with the financial crisis of 2008 marking a turning point. “On a personal basis, 2000 to 2008 was a period of dynamic change, because Deutsche was building out its business, but the overall market was fairly stable,” he explains. “The years 2008 to 2011 were really the revolution. Everyone was asking how we optimise our business. There was a change in the nature of the customer-to-prime relationship. Whereas before the crisis, primes might worry about the counterparty creditworthiness of their hedge funds, now it was hedge funds worried about the counterparty creditworthiness of their prime broker.”
He describes the situation today as “probably somewhere in the middle” between stability and flux. The industry has coped with a period of significant regulatory change and is now starting to engage seriously with AI and data. “It’s not as dramatic, but given the nature of the client segment, these are clients that are always looking at new investment ideas, new markets and new product,” says McCooey. “We’re always going to be challenged by the client’s demands, but I think the focus for us as large institutions is how we deliver better, more valuable products to our clients in a more efficient manner. I think you’re going to continue to see growing adoption of data and metrics, but at the core, our customers are still expecting us to clear and settle their trades, provide timely reports, protect and safeguard their assets.”
In such an environment, where expectations of efficiency in core services are a given, what does he see as the most fruitful areas for competitive differentiation among prime brokers? “Capital introduction is front and centre with a lot of customers,” says McCooey. “What can you do to help me raise money, help us market our funds in the industry?” Consultancy is another area he singles out, particularly for funds in their start-up stage. Securities lending also remains key. “The ability to source and secure inventory at competitive rates, whether from internal or external sources, has always been a measurement by which hedge funds can determine who can provide value, particularly as we get into hard to borrow names,” he says.
Last, but not least, McCooey stresses client service: “There are always going to be challenges, but if you can make your customers’ lives easier in terms of their day to day activities, it augurs well for a long relationship. It takes a long time to onboard a prime brokerage relationship because of the level of trust and the amount of interaction. We are their conduits to the marketplace, we are their bank account, we are their safe custody, we’re their clearing agent, we’re their report provider, we interact with their administrators. That’s probably the biggest difference, coming from the derivatives side of the business, which was very much a transactional type of relationship.”
Client relationships are far from a one-way street, McCooey insists. “Every time you engage with clients, it’s a potential learning experience,” he says. “I find client engagement extremely worthwhile; I’ve learned so much dealing with some of the smartest individuals around in terms of how they view markets, how they look at investment decisions, and what’s important to them. The dynamic nature of hedge funds and their ability to react quickly to market trends and investment trends makes this industry very exciting.”
In addition to client relationships, McCooey places strong value on partnerships with co-workers. “In 2000, I really didn’t know much about the prime brokerage business, and I was very fortunate to have people who were both bosses and mentors take me under their wing, give me the opportunities and the freedom to either succeed or fail, but who were always very supportive. Even though I’ve now been in the industry for a significant amount of time, I am still learning every day.”
Being naturally optimistic, McCooey has found upsides to the current lockdown, where he and his colleagues and customers are for the most part physically isolated. “In the office you’re constantly distracted when you’re working on the trading desk, people are shouting at you, you’re looking at the computer terminals, you have calls coming in, you have the ambient background noise of 600 people on the floor,” he says. “I think communication has actually been better under lockdown, because we’re more focused; when you’re sitting in your home office or your living room or your dining room by yourself, you want that communication.”