Emerging Market Equity Long/Short Fund
Tell us about your business and your role.
We are a fledging global EM asset manager in a broader business. I am the portfolio manager and CIO of the first fund. We are equity focused, initially L/S and will add a long only component in due course. Our goal certainly is to broaden our range over time.
Why did you decide to outsource your trading? How do you perceive CF Global?
There were two to three considerations.
For anyone building a business as opposed to having a substantial business / fund already, the fixed costs of an in-house trading capability are substantial. We would rather allocate resources to other tasks.
A larger firm that can afford inhouse trading still may need support in more than one geography, so you have the benefit of 24-hour access. Even if you have your own staff, there is a limit to how much they can access, so plugging into a third party makes a lot of sense.Regarding CF Global, we did extensive research into outsourced trading at our former fund which allowed us to move quickly. With no Asia desk, we had done a lot of analysis and the logic of signing up with CF was overwhelming.
That stamp of approval and the fact that CF could deliver within a short time meant we could focus on other things.
What other things did you do instead of building a desk?
From a cost perspective, it means we can dedicate more resource to the front office – specifically, hire more analysts. From a time perspective, regarding the regulatory and compliance work that needed to be put in, being able to compartmentalise one aspect and say, ‘That is in CF Global’s hands’, was very helpful.
How do you perceive CF Global?
We have a range of items we think about investing in as we work to scale our business. An in-house trading team isn’t one of them, as we look at CF as a long-term partner. Over time, we hope the economies of scale and the quality and cost of execution will make an even more compelling case.
We are grateful for the setup resources CF provided, happy with how things are working so far, and appreciate the depth of coverage.
How did you execute in the past, and how does current service compare?
Our last fund had a full in-house desk. In terms of trading service in cash equities, we see no difference whatsoever (moving to CF Global). Regarding options, it is still a bit too early to say, because I’ve not done much in this area recently. But I’m optimistic that the service will prove equally helpful.
How does CF Global fit within your workflow? What else do they do besides execution?
It certainly feels very integrated. I talk to CF, you talk to fund admin and the custodian, and it feels very seamless with one chat integrating traders and operations. I don’t have to ask someone specific – I pose the question to the group and the right person within CF picks it up.
My next question could be about topics as varied as compliance or Brazil. I feel like someone will be able to answer the question regardless. Your trader also sends through some helpful sell side commentary each day, focused on the stocks I hold.
How much of the post-trade process does CF manage for you?
Certainly a fair amount – we don’t need to worry because the people on the other end know what they are doing.
Does it matter that the traders aren’t sitting in your office?
Not one iota. There would have been many days at my old firm where I didn’t see the traders. As an EM guy, you get used to not being in the same place as the person you are interacting with.
To what extent does using CF Global as an outsourced trading partner diminish or enhance the information flow you receive from the Street?
At the moment, our coverage is slightly more than what I was used to. Your guys seem to be well attuned to the idea of providing market colour. Also, CF has the scale (with a broad counterparty network) and the ability to sift through large amounts of information quickly.
We are starting off on the small side and can’t sign up with every broker on the street for research, so it is helpful to find out if a sell-side opinion has changed because I wouldn’t necessarily find out directly.
What do end investors say when you describe how you execute across EM?
I’ve had zero pushback. It makes sense for us to focus resources on research, and CF Global has multi-geography live hour trading footprint. That’s all people need to hear, and everyone gets it.