Prime Brokerage Profile, Alternative Investment News
By Pamela Appea
Salomon Smith Barney, a member of Citigroup
Barry Weiss, managing director of equity finance
Sal Campo, managing director, equity finance division
Thomas Tesauro, managing director, co head of global equity finance
By Pamela Appea
Salomon Smith Barney’s prime brokerage division is launching an international prime brokerage effort. At the same time, it is looking to aggressively attract assets from institutional investors by introducing new services, for example, in the area of risk management, said Sal Campo, managing director of the equity finance division, under which falls prime brokerage.
Prime Brokerage Services/Structure
SSB’s prime brokerage division was started five years ago, and it now aims to become a full-service global firm, to take its place in line with older more-established prime brokerage units. SSB services medium to large-sized hedge funds, said Campo, noting the group’s largest hedge fund clients boasts about $4 billion to $5 billion in assets and its smallest hedge fund weighs in at $50 million.
SSB offers services including securities lending, operations, technology and customer service. It has gained additional support services through the Citigroup merger, including insurance, research and banking, which SSB hopes will strengthen relations with institutional investors, such as pension funds, said Campo. In addition, Citigroup has a capital introductions group, which is beneficial to SSB’s prime brokerage clients. A Citi staffer can introduce pension funds to the prime brokerage group’s clients, Campo explained.
Institutions seen gaining in Importance
As more institutional investors—pension funds, endowments and foundations—commit dollars to hedge funds and other alternative investments, SSB’s prime brokerage division is looking for ways to better accommodate institutional investors served by the division’s hedge fund clients, said Thomas Tesauro, managing director.
Pension funds, many of which have established relationships with Citi, are still somewhat skittish, however. To attract these investors to its hedge fund clients, SSB is currently planning on expanding or developing transparency and risk management services. The group is putting a formal risk management system in place, Campo said, noting pensions want in-depth reporting.
“What we’re seeing in the market place is that pension funds are looking for independent transparency,” Campo said.
Pension funds are starting to request information from independent parties such as prime brokerage, instead of going to the hedge funds for the data.
Growth Plans
SSB is widening its reach in addition to its services and has launched an international prime brokerage effort. The effort will be run out of its headquarters in London and is slated to pen within the year. Gary Link, who recently joined from J.P. Morgan Chase & Co., will serve as managing director and head of the office. He will oversee a staff of about 12 people, five of whom have already been hired.
SSB’s prime brokerage division is opening in London to capitalize on rising demand for hedge funds from European investors. “The piece we’re missing is the global prime brokerage component,” Tesauro said. “It’s just a matter of time.” Tesauro and Campo said they expect it will take time to develop the international prime brokerage division, noting that its major competitors have the short-term advantage of being a bit more established.
On the domestic front, SSB’s prime brokerage division is also expanding, and the division will soon name a managing director for a planned San Francisco office this month. At the same time, the group has hired John Bell for its San Francisco office, who hails from Donaldson, Lufkin & Jenrette. Bell joins as a director, responsible for marketing prime brokerage services to prospective clients, in addition to providing services to existing clients.
