SDX expands quantitative investment offering via Glassbridge

How multi-issuer platforms are rapidly becoming hubs beyond structured products

The Strategy Data Exchange (SDX), a subsidiary of Singapore-based SoHo Capital, has signed GlassBridge Asset Management as the first bespoke hedge fund provider to its platform for robo advisors, private banks, brokers and third-party asset managers.

GlassBridge, a New York-based hedge fund and alternative investments provider specialised in quantitative portfolios, will make its strategies available via SDX, which can sell them to wholesale channels in the form of funds, structured products or separately managed accounts (SMAs).

"There are thousands of funds and investment firms doing very similar things and offering similar products, and we believe that we are going through a time of transformation and disruption," said Robert Picard (right), chief strategist at GlassBridge. "With the compression of fee structures, margins dropping and lacklustre returns traditional products are under pressure and asset management firms have been forced to look to other solutions."

The firm is looking at ways and mechanisms to deliver "the next generation of quantitative investment via different platforms", according to Picard. "The partnership with SDX and AG Delta is complementary to our existing efforts and provides us with an Asia centric platform to deliver alternative investments using different vehicles. The focus is not on the products which per se are not new but on finding new ways to make these investments accessible in an efficient manner."

Over the last year the demand for alternative risk premia strategies (smart beta) from institutional, high net and retail investors has skyrocketed, and SDX was launched to provide high level institutional calibre strategies (such as those provided by Glassbridge) and deliver them via structured products and actively managed certificates (AMCs), according to Frank Troise (pictured), founder of SDX and a principal at SoHo.

"Glassbridge has a significant inventory of strategies which will now be available via SDX's library," said Troise, adding that the objective of the partnership between Glassbridge and SDX is aimed at increasing distribution which will be provided by AG Delta's platform.

Robo expansion

"From a technology perspective we are taking robo advisers to a new level," said Troise, noting that that SDX is also targeting robo advisors seeking to expand their offering beyond vanilla exchange-traded funds (ETFs). "[AG Delta] is already connected to a large network of investment banks (manufacturers) and private banks (distribution outlets). We will provide a library of content within AG Delta to those end users."

AG Delta provides a "very powerful platform" with over 20 institutions plugged in, and a superior service and functionalities than those offered by robo advisors, according to Troise. "You can't get rich 'selling salt' because there is no margin anymore and being able to offer this kind of strategy in an automated and streamlined way will resonate with investors and open up new opportunities to generate alpha and outperformance for which you need active strategies," he said. "The catch 22 with robos is that they're effectively selling the same thing, and there's no value added, whereas AG Delta can offer you that but also strategies aimed at outperforming so the product mix is significantly more comprehensive."

SDX has also developed data around separately managed accounts (SMAs) and is also considering its options around other wrappers such as unit investment trusts (UITs) as well. "However, the focus for this year is AMcs as we think they provide a great vehicle to deliver risk premia," said Troise, pointing that SMAs have not had traction in Apac although they allow manufacturers and portfolio managers to deliver strategies for distributors or investors as an alternative to funds or investment structured products.

"We have now digital wealth management platforms approaching us and asking about how to access those strategies and deliver them to their end users. Historically, investment banks did not have content to show but demand from end investors is forcing investment banks to rethink the way they sell their risk premia strategies."

Although banks are not inclined to provide products on a white label basis they are now seeing the value of giving access to third-party strategies and accessing distribution via platforms which are also evolving in terms of the products and content they offer, according to Troise. "Multi-issuer platforms are rapidly becoming hubs beyond structured products," he said.

AMCs

Following a number of AMC show case launch events in April and the subsequent strategy sponsor roadshows, demand for AG Delta's Digital AMC Distribution platform across the board from major private banks, external asset managers, family offices and insurance companies in the region, "has been robust", according to Andrew Au (right), AG Delta's chief.

"Several leading organisations amongst this group have signed up to the initial wave of roll outs of the AMC platform," said Au, adding that the ability of the platform to also cover "the last mile for AMC's - ie. product due diligence, investment suitability and appropriateness amongst accredited and professional investors as well as RM and product team collaboration" will be invaluable.

"AMC's are a smart component to building strategic asset allocation, model portfolios and discretionary portfolio mandates," said Au, noting that they are also fast to setup, and cheaper with smaller entry ticket size levels. "They are also great for active advisory mandates where AMC's focus on a central investment theme so you get the best of both worlds. The bookbuilding capability with client advisors and the ability to show case pre and post-isin (ie potential and live) strategies for a single distributor or across the network is powerful."

Daniel Strauss (below), COO at GlassBridge, said that as the firm builds a Generation 2.0 asset management business one of the focuses is on making its products available digitally in various platforms and devices but more importantly to customise and tailor them to meet the needs of investors.

"The ability to create bespoke products and roll them out quickly, AMCs, ETFs and other structured products is one of our competitive advantages," said Strauss, adding that as investors are becoming more discerning and these products therefore more popular, there is scope to deliver quantitative investment strategies based on proprietary models via these instruments.

"AMCs have been around for some time on a number of markets, particularly in Switzerland, but we see increased traction for this product from private bank and asset managers within Asia because it can deliver a variety of hedge fund like quantitative and systematic strategies," said Picard. "This vehicle is also enabling a broader group of investors exposure to difficult-to-access strategies."

According to Staruss, AMCs have been a success for investors and product providers in Europe, and there is appetite for this kind of product because it offers flexibility to asset managers when structuring their portfolios and having access to aggregate order books from an administrative perspective.

"Hedge funds managers are considered to be the best active asset managers and what we are seeing is that some of those managers that were very exclusive in providing access to their strategies are opening up that access and looking for ways to increase their connectivity with banks and asset managers.," said Picard.

The overlapping between hedge funds and structured products, and asset managers and investment banks will continue "because of the spread-compression, demand for transparency, and increasing appetite for alternative strategies coupled with an expansion of the investor base", according to Strauss.

"As these dynamics persist and competition increases, asset managers are being forced to look for unique and innovative ways to deliver new strategies," said Strauss.

"Banks play a very important intermediating function for both sides as they provide a high degree of transparency and provide the wrapper to embed these liquid alternative strategies thereby making them available to more investors in an efficient way," said Picard.

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