Goldman Goes Digital for Cap-Intro Service
Goldman Sachs’ prime-brokerage unit is developing an electronic capital-introduction service that could become a model for the bank’s rivals.
The project, called Marquee Connect, was conceived of before the coronavirus pandemic but accelerated as the outbreak halted travel and in-person meetings over the past four months. A beta version currently is in testing with a small number of investors, with a formal rollout expected in the next month or so.
Marquee Connect aims to allow investors that work with Goldman to discover the full range of hedge funds that use the bank’s prime-brokerage service and begin interacting with them. Users can search the vehicles by strategy, geography, fees and performance.
Considering Goldman’s status as an elite prime broker, the service promises to give its base of investors a quick line to some of the world’s best regarded-managers — or at least better position them to get in the door with those firms. But it probably won’t help them gain access to the large number of top-tier funds that are closed to new commitments.
Marquee shares some similarities with commercial hedge fund databases run by BarclayHedge, Eurekahedge and Hedge Fund Research, along with Context 365, an online service managed by cap-into conference organizer Context Summits.
But those products list funds Goldman never would accept as clients. Some of the fund operators are too small and have little chance of growing to the point where they would appeal to institutional investors, for example, while others have poor returns or other issues.
Also unlike nonbank databases, Goldman isn’t charging managers for inclusion. Rather, its reward would be the same as it receives from its standard capital-introduction service: higher trading profits as the firms take in additional capital.
Investors get access to the commercial databases and Marquee free-of-charge.
Meanwhile, it doesn’t seem that word about Marquee has spread to other banks, even though 500 managers already are on board. Indeed, executives at competing prime brokers said last week they were unaware of the offering. In a probable sign of the times, however, they described the concept as likely to catch on.
“That’s pretty cool. It sounds like a good idea,” one executive said. “They will definitely see banks copy that.”
Until March, Goldman regularly hosted in-person capital-introduction conferences and arranged meetings between hedge fund operators and investors. In doing so, the bank prides itself on delivering white-glove service to clients on both sides of the table.
But the pandemic has quickly swept aside many common practices in the hedge fund industry.
Until this year, for instance, the mere idea of virtual capital-introduction meetings was held in low regard. One example of change on that front: In the first week of April, Morgan Stanley hosted an online event in place of what would have been a well-attended conference in New York. And seemingly all of the bank’s peers have held their own virtual gatherings.
Goldman also has hosted virtual conferences. A July 27-30 event focused on emerging managers will feature presentations by some 50 firms. Among them: Atreides Management, CaaS Capital, Candelo Management, Carronade Capital, Dilation Capital, Fernbridge Capital, Kize Capital, MIK Capital, Octagon Capital, Tri Locum Partners and Yarra Square Partners.
Marquee goes a step further, for the first time giving investors unchaperoned freedom to root among managers that work with Goldman. It’s unclear how the service might alter interactions between the bank’s cap-into personnel and limited partners.
Overseeing the project is capital-introduction chief Diana Dieckman. She reports to prime-brokerage heads Cyril Goddeeris, Kevin Kelly and Puneet Malhi.
Goldman served as the primary or secondary prime broker for 1,902 hedge funds during the first quarter, the most among its peers, according to SEC records. Morgan Stanley was second at 1,761, according to Hedge Fund Alert’s Manager Database.
Goldman’s top prime-brokerage clients include Adage Capital, Baker Brothers Investments, Coatue Management, Citadel, D.E. Shaw, Element Capital, Elliott Management, ExodusPoint Capital, Hillhouse Capital, Kirkoswald Asset Management, Millennium Management, Point72 Asset Management, Tiger Global Management, Tudor Investment, Two Sigma and Viking Global.