Snce the inception of the markets in Financial instruments directive (miFid) on 1 november 2007, there has been increased focus on creating a truly level playing field for investors – improving investor protection along with the efficiency and integrity of the european financial markets.
This has presented investment firms and stock exchanges with challenges and business opportunities alike, where careful order execution and the provision of comprehensive pre and post-trade information are of the upmost importance.
What we have witnessed over the three-and-a-half years since its introduction is a revolution in terms of trading execution.
The age old ‘fully-bundled’ (or ‘full-service’) offering of research, sales and trading of ‘sell-side’ broking, with its limited transparency and lack of competition has been blown apart. New firms have emerged in swathes, with specialist services focusing on any and every part of trade execution.
Similarly, in days prior to MiFID anyone wanting to buy shares in Vodafone, the UK-based telecoms company, would have had to seek a price on the London stock exchange and hope to get a good deal.
MiFID was a ground-breaking development in European capital markets, and ended the so-called ‘concentration rule’ that meant shares of a particular company were traded only on their national exchange. It paved the way for competition, allowing alternative trading venues to spring up, listing shares on a pan-European basis and challenging the exchanges at their own game.
Such competition and intense focus on the un-bundled elements of the ‘old model’ have enabled investors to take advantage of a leap in execution efficiency.
Increased access to liquidity and market information, with reduced market impact and cost savings are but a few of the headlines that have enhanced dealings in pan-European stocks.
Many would argue that such leaps in optimisation and efficiency were long overdue. Indeed, one of the major casualties of the ‘old ways’ is the family office (FO).
We are currently witnessing an unprecedented modernisation of the family office. Advances in every facet of FO operations are apparent, with efficiency savings and margin control very much at the forefront.
It would seem that for too long, FOs have not enjoyed the same level of control over all matters pertaining to their investment decisions that their peers in the institutional or hedge fund world have done. This needed to be addressed and many FOs are actively seeking to
take this to task with immediate effect.
A great case in point is that of the TY Danjuma Family Office. For a number of years investing in financial markets was undertaken passively – where advice was extremely expensive (execution even more so), information poor, transparency terrible and autonomy almost non-existent.
With the meltdown of global markets in 2008, it was alarmingly apparent that this approach needed a comprehensive review and overhaul. The events of that year were unprecedented, where the pace with which events unfolded required hands on attention from investment professionals.
TY Danjuma hired Geoffroy Dedieu as CEO of the newly formed family office in 2009. Previously he was managing director and founder of family services at Bank Julius Baer in Singapore. In reshaping the investment side of the FO he added Duncan Elmer as his assistant portfolio manager. Duncan was previously a trader for Millennium Capital Partners, a multi-billion dollar hedge fund.
Throughout 2010 Geoffroy and Duncan undertook a radical review of investing practices at the FO. It was clear that the FO had numerous issues – most notably costs (through management fees and extremely high execution charges), poor / fragmented advice, poor risk management, lack of transparency and limited information.
Possibly the most alarming revelation surrounded how the TY Danjuma Family Office had been treated as a client of firms with which they entrusted their investment dealings in securities. These concerns were broken down into the following areas:
• Execution – extremely poor quality; huge expense; highly inefficient;
• Management fees – very high for poor service; not optimal return on fees paid;
• Information flow – zero access to relevant and up to date market information;
• Research – lack of providers; slow response from brokers; not specific enough; often no relevance ;
• Discretionary mandates – very expensive; often highly illiquid; lack of control / input in investment decision; lack of care / attention to dealings; operational issues (no confirms for transactions for example;
• Anonymity – having no control over who knows what the family is investing in and why.
As a result, the decision was taken to bring the management of family money back ‘in-house.’ Funds would be actively run by Geoffroy and Duncan in a structure similar to that of a traditional institutional investor / hedge fund.The primary partner for all trading services for global equities is now BTIG. This was a legacy relationship that Duncan brought with him from his time at Millennium and has revolutionised the way in which TY Danjuma Family Office conducts its investing operations.
“BTIG are simply the most comprehensive solution to all of our needs surrounding trading and execution. They were the only solution based on the level of service they offer and the cost savings they have afforded us,” said Duncan. BTIG’s success lies in their ability to service their client’s needs on so many levels, in greater depth than they could achieve elsewhere at a fraction of the cost. In essence, the ultimate economy of scale for their clients.
Andrew Walton is the head of outsource trading at BTIG in London, said: “The firm has evolved and grown by tailoring its services to the needs of each and every client – essentially we have been moulded by those we serve. No two clients are the same and we have developed our businesses around being the ultimate resource to our varied account base.”
Outsource trading seeks to provide users with comprehensive access to every aspect of their trading and execution universe. From the inception of trading ideas and research, to timely macro and micro economic news-flow and market intelligence, the client has one point of contact with which to interface.
One point of contact means that even the smallest office can benefit from enormous economies of scale – access to a global, cross asset trading platform; access to over 300 brokers worldwide, and the specialist research that each provides; a designated trader and back-up; high touch and highly discreet service offering anonymity in the marketplace; state of the art technology (including BTIG OMS); customised web-based reporting; commission management services; no contracts, no long term commitment.
Outsource trading at BTIG represents over 100 clients trading in over $30bn in equity assets. The footprint and reach that gives the firm in the marketplace means that BTIG can continue to fulfil its commitment as the ultimate trading resource to its client base.
Unparalleled autonomy, optimisation and efficiency at a fraction of the cost of traditional broking services.
BTIG has over 1,750 institutional clients globally, and over 130 outsource trading accounts. The firm is headquartered in New York, with a further 8 domestic offices in the US and international offices in London, Hong Kong, Singapore and Sydney.