Despite being a growing reservoir of funds under management, this critically important pool of capital is confronting mounting problems collating and disseminating key data in a timely manner.
The ratings house is pinning its growth strategy on a revamped methodology that increases the emphasis on governance to 25 per cent – a timely move considering APRA’s proposed reforms.
Lakestar’s Algomi open for Aussie fixed income business
(Pictured: Jesper Bruun-Olsen)
Algomi Ltd, the fintech start-up backed by Lakestar Venture Capital, has commenced marketing its fixed income information platform in Australia, following the opening of a Hong Kong office earlier this year. The platform is like a social media hub for bond sellers – usually banks – and big investors – either fund managers or pension funds.
Jesper Bruun-Olsen, the head of Asia Pacific for Algomi, made his first trip to Australia last week to talk with potential members. He joined the firm in Hong Kong in January. While the company was formed in 2012 by four former UBS fixed income traders, it did not go live with the system, called Honeycomb, in December last year.
Swiss-based Lakestar, which is the key investor, is known for its pedigree in picking some of the most successful social media companies in the world. Its general partners and limited partners have invested in Facebook, Spotify, Skype, AirBnB, Klama and game manufacturer King.com (of Candy Crush fame).
Bruun-Olsen said that since the global financial crisis, liquidity in the fixed income market, particularly in corporate bonds, had become much more challenging as most banks had reduced their balance-sheet risk from proprietary trading. This would only get worse if and when interest rates rise.
“We’re addressing the markets which are either too illiquid or with trades that are too large to be crossed on one of the many electronic trading platforms available to investors and managers,” he said.
“That market hasn’t really changed in the past 20-or-so years. People still quote prices on the phone, which may have worked well when dealers were acting as principal, but often now they have to say: ‘I’m sorry, I can’t quote on that’. It’s very frustrating for the buy-side… We give the dealers the tool to link the buyer and the seller.”
Algomi has offices in London and New York, with nine international organisations, including Credit Suisse and Deutsche Bank, having signed up as dealers and 55 buy-side accounts across a range of fund managers, insurance companies and sovereign wealth funds.
Algomi installs software at each of the banks which gathers all the relevant information on their client activity and then gives access to the buyers to certain information so they can narrow down a potential counterparty for their proposed trade.
For instance it will tell the buyer whether the bank has traded that security and in what time frame and whether there have been other inquiries for the security.
“It allows the buyers to see who has the highest probably of being able to trade,” Bruun-Olsen said. It also helps the salesperson further by providing information on alternative securities with the same or similar risk/return profile.
“We’re not disrupting existing relationships the buy-side may have,” he said. “There’s no trade-related fee because it’s not a trading system. It’s a pre-trade information tool.”
