In this interview, Global Prime Partners, a London-based firm, talks about how family offices and similar clients prefer to operate in the hedge fund market.

Family
offices are looking to develop more in-house investment capability and that
includes hedge fund management, a trend that is boosting the business of Global
Prime Partners, the London-based firm told this publication recently.

GPP
provides services to hedge funds in the sub-€100 million region – funds that
might otherwise not interest the bigger prime brokers. (Bigger brokers are also
typically outside what small hedge funds can afford.) And this firm, which was
established over four years ago, gets a close view on trends in the market and
also on what wealth managers want to do in the $2 trillion-plus hedge fund
industry.

“Some
of these [family offices] are also bringing over in-house investment managers
and therefore looking for the sort of service we have to offer,” Kevin Loprimo,
global head of hedge fund services at the firm, said in an interview at his
smart offices in Old Park Lane. “We have been contacted by families looking to
invest in the same way that a big bank does. Being a small firm we are also
able to be very high-touch in terms of service.”

“I
am seeing more family offices hiring directly to invest into the market, and
more people coming out of the larger firms and starting their own [fund]
businesses. We are winning clients that would not be making the minimums to be charged [by a larger firm],” Loprimo said.

(This publication was told by several family office/private investment offices that there has been more interest in managing investments in-house, although only the largest organisations had the resources to handle the necessary work effectively.)

Some
of the background “noise” in the sector has also been more positive than of
late. According to data from Chicago-based tracker Hedge Fund Research, its HFRI
Fund Weighted Composite Index (in dollars) is up 2.79 per cent in the first two
months of the year. Over the past three years, the index has chalked up an
annualised performance of 4.57 per cent. So maybe after what has been a period
of muted gains, the sector is starting to shine again. According to the Financial Times, the sector is due for
its best performance in years. That would certainly be good news for Loprimo
and his colleagues.  

A
native of the US East Coast, but who has lived in the UK for the past
17 years or so, Loprimo and his colleagues are looking to expand. Already, GPP
has signed 15 new [fund] accounts in 2013 so far and he expects to sign up 15
to 20 more in the next six to eight weeks.

“Our
trade volumes are increasing; this year, we are up about 35 per cent. Our
leverage is up and we are lending a bit more for those who want to borrow,” he
said.

What
sort of hedge funds are coming into the market?

“We
are seeing continuing offerings in the global equity long/short space,” he
responded. Loprimo said one theme is where a fund looks at firms with a dual
listing in different time-zones to exploit the price discrepancies and moves
that can occur.

Some
regulatory developments have increased the minimum sizes for funds to be viable
in the market, he said, but the sub-€100 million market
is not really affected by this, he said.

The
economic outlooks remains uncertain – at the time of writing there had not
yet been a deal agreed about the debt morass in Cyprus – and hedge funds may yet
experience a rough patch. But at least for the moment this sector has the look
and feel of a business that is recovering from a tough time, which will be of
interest to a wealth management industry where making absolute returns, despite
problems, is still a big deal.