Being selective on the path to growth
There is growing familiarity with Dutch hedge fund structures among investors which has been driving the jurisdiction’s fortunes as a continental alternative to Luxembourg and Ireland. Service providers in Amsterdam are welcoming this progress while also being discerning in their approach.
Allocations to hedge funds are set to increase in 2021, “2020 was largely driven by volatility and global macro-economic uncertainties. The defensive approach adopted by hedge funds, the ability to demonstrate uncorrelated performance as well as navigate these choppy waters successfully has positioned managers to draw in more institutional capital and also encourage more fund start-ups” comments Delphine Amzallag (pictured), Global Director Prime at ABN AMRO Clearing Bank.
This bodes well for the Netherlands which has become an attractive domicile for managers. “Those who want to set up in Amsterdam must have a robust and relevant business model. As regulation becomes more stringent, managers need to ensure they partner with the right provider.
The increasing costs and operational burden of regulation will always form significant barriers to entry. Having strong partners will allow managers to build a safeguard and ensure their trading and operational structures are scalable,” notes Amzallag
She explains how ABN AMRO Clearing Bank aims to be selective in choosing the managers it works with: “Strategy is the first and foremost consideration. We look to take on funds which fit within our organisation’s infrastructure. We focus on offering those prime brokerage services that we are good at, therefore being discerning with the managers we work with is critical. We will always look at our clients as partners and taking on the wrong client just always ultimately leads to disappointment on both sides.”
ABN AMRO Clearing’s DNA, history and success revolves around the market making community of the Netherlands. This means equity derivatives, quant strategies, CTA, relative value, and long short equity, fit well within the firm’s framework. The prime brokerage team also seeks to support early-stage managers, in order to help them grow.
Amzallag outlines the benefits of ABN AMRO Clearing, with a special attention for smaller managers: “We operate as one entity and hold all our clients’ assets within the same system. This makes information exchange easier and more accessible, ensuring smooth operations. We can also deliver capital efficiencies to managers, which is a key consideration when service provider costs can be a drag on performance and undermine cash flow utilisation. For us, being in control of the full value chain is an advantage.”
The firm clears and finances over 18 million trades per day and covers more than 90 of the world’s leading exchanges across Europe, the Americas and Asia Pacific. Its international network provides comprehensive market access to exchange-listed instruments such as stocks, futures and options. It also facilitates non-exchange listed investment instruments and alternative products including bonds, OTC derivatives, warrants, forex, forwards, synthetics, energy and commodities derivatives. ABN AMRO Clearing consistently ranks among the top three clearers in every time zone, based on market share of transactions cleared.
A good year
Although 2020 was a tumultuous year in many ways, ABN AMRO Clearing had its busiest year ever, clearing a record 5.3 billion trades, launching new products, providing enhanced solutions and growing in client numbers.
“We are among the largest prime brokers in terms of cleared volumes and market share. We have huge operational efficiencies and capacity on the trading side, which is paramount for the types of managers we look to attract. We also have an open architecture model which we believe helps ensure each manager has their specific needs met.
“ABN AMRO is a well-recognised prime broker in the Netherlands and also in Europe now. We are growing, adding to our suite of products and offerings to ensure we can best cover our clients,” comments Amzallag.
The challenges last year has led to an increasing need for cost efficiency and a more tailored approach. Amzallag details: “We see a growing need for bespoke solutions. In a nuanced regulatory landscape, the “one-size fits all” approach is becoming increasingly difficult for service providers. Prime Brokers are becoming specialised in hedge funds strategies where they can demonstrate expertise in risk management, financing and deliver cost efficient services to allow funds to deliver performance.
And we are really well placed because ABN AMRO Clearing is nimble in its approach. Funds and managers have looked to gain a competitive edge by accessing new markets, new trading opportunities and launching new products. Given our huge global infrastructure, we were able to move quickly and support those new developments.”
The Dutch industry is also on the forefront of the ever-growing environmental, social and governance (ESG) trend. Investors in this market have been leading the way in this regard and according to Amzallag, this way of investing fits in well with the culture of the ABN AMRO bank: “More and more, investors are looking for funds which have an ESG component or at least want their managers to acknowledge and understand the drive towards more ESG. In an industry rife with greenwashing, ABN AMRO Clearing is developing a reputation as the prime brokerage partner of choice for ESG managers.”
The firm has declared its focus on sustainability and has outlined its overarching goal to accelerate the sustainability shift: “We offer our clients specific expertise in sustainability and are embedding these values in our products and services. To help combat climate change and promote the energy transition, we support our clients with various initiatives and share expertise to further expand our social impact activities.”
These efforts have been observed by third parties. A report on sustainability in the derivatives industry, published by the FIA, applauded ABN AMRO Clearing for its efforts in this regard. The report details: “ABN AMRO has a proven track record on sustainability issues in many areas, but one particular element that stands out in our markets is how the firm conducts its derivatives clearing operations.
“Clearing members assume responsibility for the derivatives transactions of their clients and implement regular screening to ensure they are not servicing a client that poses a large financial risk or engages in conduct that conflicts with the clearing member’s business ethics.”
Having a well-developed financial eco-system in place is a clear advantage for Amsterdam to become a prominent location for fund business in Europe; together with the relevant industry partners, ABN AMRO Clearing is well positioned to service this growing market.
Global Head of Prime, ABN AMRO Clearing
Delphine Amzallag is the Global Head of Prime at ABN AMRO Clearing, based in London. She joined the firm in June 2015, a leading provider of equity and derivatives clearing services. Her team is responsible for maintaining and developing client business relationships for prime services covering institutional investors and alternative investment managers, with a specific focus on arbitrage strategies, relative value, equity L/S & CTA.
Prior to joining ABN AMRO Clearing, Delphine spent 10 years at Barclays Capital as a Director in Prime Services responsible for the relationship management and client service teams for alternative investment fund managers. Previously she worked at the London based Hedge fund GSA Capital and Paris based financial institutions Lyxor and Societe Generale. Delphine holds a Bachelor degree (Hons) in Finance and Financial Services and she is an active member of 100 Women in Finance.