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Goldman's digital hedge-fund matchmaking push boosted by lockdowns

[April 27, 2021] By Maiya Keidan

(Reuters) - Goldman Sachs' long-planned online migration of some lucrative prime-brokerage businesses picked up steam during the pandemic as hedge funds and investors working from home were unable to meet in person, while other Wall Street banks are taking more measured steps.

Last July, Goldman Sachs Group Inc launched Marquee Connect, offering online virtual introduction services for top clients. Other prime brokers told Reuters they were also moving to bring some prime broker services online, but one cautioned that clients may be getting "Zoom fatigue" with hopes to resume meeting in person once more people are vaccinated.

Humans have long handled capital introduction services, in which third parties like banks attempt to matchmake investors with hedge funds. But as large swathes of other bank services have moved to virtual platforms, banks have been increasingly looking at how to move some of these services online too.

Hedge fund managers and investors on Goldman's Marquee Connect, for example, create profiles that allocators can use to search for the funds that fit their targets.

Over the past nine months, the application has signed up over 900 hedge funds, more than 600 investor firms and made 4,500-plus connections, executives in Goldman's prime brokerage team told Reuters.

"While we’ve been working on developing Marquee Connect in conjunction with our clients for a few years, the timing of our launch... was fortuitous," said Isabella Meyer, a member of the capital introduction team and project lead on Marquee Connect, adding that the work-from-home trend accelerated usage.

Other prime brokers told Reuters that while they had not yet launched a similar product, efforts at looking at how to move some services online may be underway.

"Jefferies continues to leverage technology to facilitate supply and demand between managers and investors which includes considerations to certain functionalities being brought online,” said Leor Shapiro, Managing Director and Global Head of Capital Intelligence at Jefferies.

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The Goldman Sachs company logo is seen in the company's space on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., April 17, 2018. REUTERS/Brendan McDermid/File Photo/File Photo/File Photo

Mike Monforth, global head of capital advisory at JP Morgan Chase, said: “We are always looking at digital solutions. Capital introduction is an area of focus but we will be patient to ensure whatever solution we deliver will indeed be valued by our global client base.”

Citi, Barclays, Morgan Stanley and Credit Suisse declined to comment.

One of the key parts of capital introduction matchmaking is often conferences in which hedge funds and investors get to meet face to face. The pandemic forced that aspect online, drawing greater participation.

Shapiro at Jefferies said its flagship conference went from around 200 investor attendees in the previous year to roughly 300 during the pandemic.

Monforth at JP Morgan said the bank last year put on 47 events with over 5,500 participants compared to 43 events and 1400 participants the previous year.

Hedge funds have raised more money with the shift online, adding $844 billion in capital since March 2020, with $6.1 billion in new investor cash in the first quarter of 2021, according to data from Hedge Fund Research (HFR).

Despite all the benefits touted of using virtual tools, prime brokers admit investors and hedge funds are keen to get back to in-person meetings.

"There is a bit of Zoom fatigue," said Monforth at JP Morgan, adding that virtual meetings were here for the long term alongside face-to-face interactions.

Goldman Sachs' Diana Dieckman, global head of the capital introduction team within prime services, said: "There're all these now tools out there now, but that doesn't replace in-person, so it will be a hybrid approach going forward."

(Reporting by Maiya Keidan; editing by Megan Davies; Editing by David Gregorio)

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