Operations Pros Promise to Cut Clients’ Costs
Two former Apollo Global Management executives and a one-time GlobeOp professional have launched a consulting firm that aims to help hedge fund managers cut costs.
Gene Donnelly, John Phinney and George Evans quietly set up Convergence in April, but didn’t officially open the Fairfield, Conn., operation for business until this month. They’re pitching their services both to fund operators and administrators, with an emphasis on offering operations-focused data and advice.
For example, Convergence has compiled a “benchmarking” database on the levels of staffing and infrastructure that hedge fund managers maintain in relation to their sizes and strategies, using information from public documents and interviews with the operators. The database contains 9,600 SEC-registered investment advisors, with an emphasis on the biggest 475 based on regulatory assets. Staffing data can be broken down according to the duties of the employees. Clients can purchase the data and related analytical tools, or can engage the firm as an advisor, to compare their operations to those of similar firms and look for ways to become more efficient.
Convergence also plans to supply staffers to perform related work that many managers regard as clerical tasks.
The effort is aimed at capitalizing on a desire among hedge fund managers to reduce their operational expenses, in part by taking over tasks that administrators aren’t always equipped to handle and often are handed off to high-paid employees. For example, a firm that wants to move into a new asset class might assign a staffer on its trading desk to research the area and implement the needed infrastructure.
According to a study that Citigroup’s prime-brokerage unit released in December, fund operators spend $14.1 billion per year, or the equivalent of 0.65% of total industry assets, on marketing, investor relations, risk management, compliance, technology and business management. What’s more, economies of scale dictate that those costs are proportionally higher for smaller shops.
Donnelly was chief financial officer of Apollo Global Management from July 2010 to August 2012, while Phinney held the same title at Apollo Fund Group from March 2008 to March 2013. Evans most recently headed business development at recruiting shop DAK Intelligent Search and DAK affiliate Gladstone. Before that, he held the same title at GlobeOp, Bysis and J.P. Morgan.