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Hedge funds tapping outsourcing trend to set up operations in Asia

Wednesday, August 17, 2011
Opalesque Industry Update – Overseas hedge funds looking to set up operations in Asia are taking advantage of the emerging outsourcing trend to save on expenses. The latest firm to embrace the latest fad is BTIG Hong Kong Limited, an affiliate of BTIG, LLC, a US-based financial services firm specializing in institutional trading and related brokerage services. BTIG Hong Kong has embarked on launching its outsource trading desk and related services to clients in Asia.

In a report Trevor Harrison, BTIG executive director in Hong Kong, said he expected the trading desk to receive positive reception among equity funds managers and newly established funds. The outsourced trading desk will accept fees only after a trade is completed and does not charge retainer costs. However, fund managers have to set up a brokerage account with BTIG first.

“We have clients in Australia using us as their London or New York trading desk, and have managers in New York using us as their Hong Kong trading desk,” says Harrison told AsianInvestor.

Another report by The Asset claims that BTIG’s trading desk would allow fund managers to outsource their internal trading functions and also enable investment managers to leverage the BTIG’s 16-person global team regardless of their size. More importantly, the outsource service can be tailor-fit to accommodate the distinct needs of each clients. To do this, BTIC can represent itself as the “sole trading arm, supplement an in-house desk, handle overflow on heavy trading days or provide coverage when in-house traders are unavailable,” the report added.

Jesse Lentchner, BTIG chief executive officer for Asia-Pacific, told The Asset: “BTIG understands the challenges facing fund managers who want to execute their global strategies and grow their managed assets without having to build out a dedicated in-house trading desk. BTIG’s outsource trading desk provides these managers not only with a valuable service, but also with instant trading expertise.”

According to AsianInvestor, outsourcing is becoming a growing trend among hedge fund managers with more than $1bn. However, outsourcing is especially beneficial for smaller hedge funds that do not have sufficient capital or resources to create their own in-house trading desk. Brian Jepsen, head of Tora Outsourced Trading revealed that U.S.-based Tora Trading Services partnered itself with Asia-focused hedge funds in 2005 to launch its trading services in Asia. Jepsen disclosed that Tora made the move at a time when there were significant Japan long/short equity fund launches. Also, 2005 was a great year for the Japanese market which had outperformed most economies in the region.

Advance Trading reported early this month that hedge funds have been increasingly relying on service providers for their operations. The global economic downturn has made outsourcing more attractive and many hedge funds look at the trend as a tool to mitigate risk, achieve optimal efficiency in operations and reduce operational costs.

“Outsourcing services create value by providing access to global best practices at a rate that can be directly tied to assets under management (AUM),” the report said.

Aside from decreasing overheads and relegating their operations to outsourcing services, outsourcing is also important for hedge fund managers as it buys them time while they try to resolve in-house issues or implement reforms in their strategies.
Komfie Manalo

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