Agency institutional broker BTIG has made four senior Asia hires based in Hong Kong as it strives to expand its traditional stockbroking platform in the region.
It named Eddie Li from SG Securities as director of sales trading in Hong Kong and China B-shares; Mark Yetman from CLSA as director of equity sales focusing on Taiwan; John Chang from DBS Vickers Securities as director of equity sales covering Korea; and Ken Gordon as a fundamental quantitative analyst.
The firm says all the roles are new ones. But BTIG did recently lose Steve Conway from its Singapore office. He joined MF Global as head of sales trading for Greater China.
In keeping with BTIG’s business model, all the new hires are senior with at least 17 years’ industry experience. Jesse Lentchner, who joined BTIG as Asia-Pacific CEO almost a year ago, notes that the average experience level at the firm is 13 years, and says it is even higher in Asia.
“We are a high-touch business,” says Lentchner. “We don’t try to lead by cost or price. We don’t think we are the cheapest on the street, but we do think we have among the most experienced sales traders.”
BTIG’s core business is sales trading -- executing equity orders for large institutions. It started in the US about eight years ago with less than 10 people and now employs over 400 staff. Outside of the US, it has offices in London, Hong Kong, Singapore and Australia.
It has 35 people in Asia and has a synthetic Japan office, with four people working Japan hours out of the US.
In outlining his strategy, Lentchner notes that Asian firms use bundled services far more than their peers in the US, meaning the available commission pool for companies without research or corporate access is less than it is in the US.
“One accepted way of counteracting that is creating a research pool and research team, which would be a large fixed cost, starting a product from scratch and competing against institutions that are very good at it,” he reflects.
“My strategy is slightly different. I am hiring people that have enough knowledge and experience to be able to cover analysts and fund managers directly without the full research behind them.”
Data from Greenwich Associates show that 53% of US institutions had either client commission arrangements or commission sharing agreements in place in 2010, compared with 29% in Asia.
“I do think Asia is continuing to unbundle and I hope it does,” Lentchner adds. “In the meantime I am not content to wait for it, so we are doing other things that will make us money in the meantime.”
He concedes that margins will continue to tighten in the industry, with commission rates only likely to keep falling. But he feels confident in BTIG’s business model.
“There was something that used to be called stockbroking, with people paying for having smart guys call them on the telephone to help clarify their thoughts and crystallise their investment process. Frankly I don’t think that changes, it is a timeless thing and that is what we do at BTIG.”
Lentchner expects to continue hiring sales traders across the region. “We are also looking at tangential businesses that we would hope to roll out later this year. I would be surprised if we did not have a further 10 to 15 people employed by the end of the year,” he says.
Pressed on the roll-out, he adds: “We have a sales trading business and an outsourcing business. Then we expanded into becoming a prime broker. These are all ways of supporting clients around their trading, so we are looking at some businesses in Asia around it, but I can’t say yet to be honest.”
He mentions that BTIG is also open to geographic expansion this year, although could not say for certain that it will happen.
BTIG in the US has a large outsourced trading business for many small and mid-size hedge funds, and now it has 180 clients in its prime brokerage platform, says Lentchner. It also started a futures business in the US last year.
It has recently been reported that BTIG has lost at least 42 fixed-income staff in the past year in the US, having hired 75 debt traders and salespeople in 2009.
Lentchner confirms this is true. “Fixed income really started during the crisis,” he notes. “Some things worked really well in the crisis and then stopped working when things returned to normal. But our fixed income department has more people working for it now than it did a year ago.”