UK Based Long Only Investment Manager
We’re a London-based long only equity manager running European and Global strategies. Within these, we manage UCITs and segregated funds for institutional clients including a Sovereign Wealth Fund and a US Educational Endowment.
How did you execute in the past?
We’ve been in business for 10 years and had a trader about six years ago. When he left, we outsourced trading which was the best fit with our view to focus on key investment tasks. As our business developed and we required SEC authorization for the US fund, our incumbent provider could not service us so we were forced to deal ourselves for one account.
There were two big catalysts. The first was MiFID II, as we were keen to have complete segregation between research and trading. We were also still dealing ourselves, which didn't provide a satisfactory level of compliance or results for our clients.
As we’re very focused on delivering alpha, we apply our (limited) resources to what we see as the key pieces of the investment process: Stock analysis, selection and portfolio management. We outsource several other functions.
Global, efficient, good BCP, specialist traders in the regions, experienced: all these things mattered in our due diligence. The fact that CF has multiple offices also helps (for redundancy).
Did your experience (running a buyside desk) affect the decision?
Very much so. I knew what I would expect from an in-house dealing team and I looked for something similar – experienced, able to efficiently access liquidity. We didn't have enough business to justify many counterparties, so we wanted a partner (with a broad network) who could address that, too.
If I go back four years, every broker on the street would provide trading commentary. That's changed – so a desk that can provide me with broad market colour is an important consideration.
What does that intel look like?
Daily contact. We get all news flow regarding names in the portfolio – we also look for info and news on anything that's likely to impact share price. If there is natural liquidity in names where there isn't usually, we also want to be aware of that.
What else does CF do?
We outsource part of our middle and back office functionality to CF because we don't have that capability ourselves. Almost everything except for the physical delivery - that big chunk of order flow we outsource to CF Global. Efficient, timely, professional.
From my experience running a desk, the TCA feedback loop is also key. Does the feedback change anything we do? If you have the information, you can choose to change or not. If you don't, you're acting blind.
What do your external clients say when you tell them you use CF?
End investors appreciate the clean separation. We have no influence on where CF executes, and unconflicted execution is an important thing. There are always potential inducements from partners - but for us, we include in any RFP that we outsource execution to CF and clients are happy with that.