Episode Transcript
Jamie: Hello everyone, and a very warm welcome to another episode of our now award-winning podcast, Hedge Fund Huddle. I'm sure I'm not allowed to keep saying award winning. It must get tiring after a while, but it was something that happened recently, so we're still going with it for now. As usual, I am your host, Jamie McDonald, and today we are talking about the linchpin role played by prime brokers in the hedge fund world. As a quick reminder, prime brokers offer a range of services to hedge funds and other financial institutions. Now, if you don't already like or follow us, please do so now. It's how you hear about our latest news and the next episode. And also, we want to hear from you. So, feel free to write to us or leave a review. Now, as you know these episodes aim to delve deeper into the world of hedge funds by talking to experts. And today is no different. The idea is that those in the industry get insights from others in it and those new to it, find out more about it. So, without further ado, let me introduce today's three guests Mithra Warrier and Lauren Degney. They are both MDs from Citigroup and Quentin Limouzi from London Stock Exchange Group. Welcome to the show.
Mithra: Great to be here Jamie.
Quentin: Thanks Jamie, great to be here.
Jamie: So Mithra, if you don't mind, I'd love to start with you. I know you're more of a sales role, and I love on this podcast to do a now-and-then analysis. So if we look back even 10, 15, 20 years, what are the kind of services you offer hedge funds back then versus what you offer now and how are the conversations different from now?
Mithra: I think the main thing is that compared to 20 years ago or even maybe 15 years ago, starting and running a hedge fund has gotten much more difficult. And the reasons for that are many because market correlations have all converged to some extent. Access to information is less inefficient. Markets themselves are more efficient. So to be able to generate alpha and to be able to capitalize on inefficiencies and dislocations, it has gotten harder. And so as a result, what our clients need has also changed. So, 15 years ago or 20 plus years ago when I first started in the business, hedge funds are really equity long short players and it was two things. Can you give them the best stock borrow possible and then can you give them as much financing on the long side as possible? And if you did those two things and you did it better than anybody else, then you were a great prime broker and it was a much more transactional relationship. What I would say is now the relationship between a prime broker and a hedge fund has evolved from being a relationship to a partnership, and I think those are related but different terms. And what I mean by partnership is right now, as a prime broker, we are much more holistically involved in all aspects of the hedge fund, whether it is helping them raise assets in addition to all the basic stuff clearing, custody, financing. It's helping them think through not just how much leverage they can get. And I know Lauren's going to touch on this, but how much capital are they using up? What is their resource utilization across all the various financial constrained resources? And then also, helping them grow their talent base, helping them with the infrastructure aspect of their business, basically helping them run their business, too. So it moved from one of being helping them with the financing and the clearing and custody to being a much more inner circle partner, to helping them run their business across all facets of it.
Jamie: Mithra, one other follow-up question you mentioned, helping hedge funds with capital raising. Is that because you have improving relationships with allocators or what capital pools are you now able to access versus before?
Mithra: Yeah, I would say actually the helping with capital raising has become more relevant now because it's actually gotten harder for people to raise hedge funds. 15 years ago, you could come out of a well-known household name, and you could maybe put in 10 million, 15 million of your friends and family money. You and your partner could be trading out from your living room, and you could reasonably scale to, 100 million or even a billion. The path to that nowadays is much harder. So, it's not necessarily that there's more , pools of capital available, although certain regions, the Middle East, as an example, are becoming much more accessible to hedge fund managers, but it's helping them cut through the noise of the competition. It's helping them figure out the best way to access that capital. So, it's less of “more capital is available.” It's more “let's help you find that capital, and let's help you figure out how to put yoursself above the competition.” And so, it's more the how of capital raising has become more relevant now.
Jamie: Sounds like I missed my window of opportunity then, coming out of a hedge fund, I should have should have done it 10 years ago when I left. Lauren, moving on to you. I know you're more involved with the internal running of the platform, and I was looking back at the growth of assets under management in the hedge fund industry over the decades, and I knew it had grown a lot. But I was very surprised to read that the amount is just over $5 trillion worldwide now, which has doubled since 2017 and was less than 500 Billion in 2002. So, the industry is still growing a lot. Let's focus again on pricing and margin, because as competition has increased and it still seems to be the same ten, 12 players, in the prime broker world as that competition has increased, how were you able to offer more, do more, be more of a partner?
Lauren: A really good question. Obviously goes to some of the points that Mithra made as well. Ultimately, it's not to suggest that price and margin are not factors in sort of decision making for clients when they decide, who to appoint as their prime broker, how to allocate their business to prime brokers. But I think you've made this sort of shift. And Mithra talked a little bit about that shift from really, transactional based relationships to service based relationships. And so ultimately when you think about the types of conversations we're having with clients at the prospecting phase, at the scaling phase with them, it's really about access to product services and financial resources, i.e. what products, what services, what financial resources do you have available and what can you make available to us over various different scenarios, cycles and investment strategies? Operational performance, huge amount of operational due diligence, goes on both sides, to be honest. I think making sure that we fully understand the client's operational processes, where their fail points are how they operate and how they think about those things. They also want to understand a lot about us. How do we perform, because, again, you end up with this sort of interconnectedness, of businesses and reliance upon one another operationally, to perform and to do well in that regard. And then I think, the other piece is really around stability and sustainability. And that's again around service models, service performance, financial resource, access, to some extent, pricing and margin. There's a trade-off there. Because quite often the trade off to sustainability and stability is typically more expensive or higher margins etc., because that's what lets something be sustainable in the long run. So I think in terms of how we think about it, we really do look at things holistically in terms of the ability to match up with clients across those three aspects. We look at things over, I would say the longer run, and making sure that the price we charge, the services, the resources, the margining, all breeds a pretty sustainable relationship, with our clients and for our shareholders as well.
Jamie: And is a rising interest rate environment. Has that been problematic for you or are you able to pass that cost straight on?
Lauren: It is an interesting one. Because the rising interest rate environment affects different products, different services in different ways. And again, it kind of goes back to that sustainability point as well. And so using that whole 20 years, 15 years and so forth, again, because clients want those partners who can be sustainable and who can be stable, it's a lot easier to sit at the table with clients and talk about pricing and talk about economics, today than it probably was again, historically. So, we're pretty well positioned to partner with clients to make sure that the economics for both parties remains sustainable and feasible.
Jamie: Quentin, moving on to you. Perhaps you can talk a little bit about your role at LSEG. I know you sit between the buy and sell side, but help us to understand, because the more I learn about London Stock Exchange Group, the more array of services, you guys appear to offer. What sort of services can you offer hedge funds? And how does that complement what the prime brokers can?
Quentin: Thanks, Jamie. I run the Investment Management and Execution Solution group here at the London Stock Exchange Group. So basically, that means that we're servicing the buy side and hence we talk a lot to the Prime as well, who is the other end of the trade and what I would say that's pretty similar to what Mithra and Lauren have said is I've seen this business evolve over the last 20 years quite a bit, and we're approaching the buy side in a much more consultative way. So being in a group like the London Stock Exchange, as you've said, there are a lot of assets and there are a lot of things that we can put in front of the clients that will help them either start or grow or change. What we're seeing right now, you just talked about the interest rate, different world that we're in right now. We see a lot of funds going multi-strat moving from maybe some old strategy that may have been a long, short equity strategy and opening up to being a macro fund. So, you have to think about these as a solution provider, as a data provider like us where we can pivot, we can offer more products. You can offer FX trading on the back of equity trading on the back of futures trading, and then help the clients do different things and help them be agile between different investment strategies. I would say also what makes us pretty similar not in how we service the clients, but in the way we see the clients to our friends on the prime brokerage side is we really look at investment managers at every stage of the way. We look at emerging managers, we look at new hedge funds, and we offer them probably what they need at the time, and we show them the entire solution stack that we have, and they can pick and choose what they need when they just start their fund, which is really for them making sure that they have the right investment thesis, that they have the right track record so they can grow and perhaps they're going to need less trading, more pre-trade functionality, in order to pick and choose stocks or products to put in their investment portfolio in order to track their portfolio. Whereas when they grow, they may need something a lot more niche. You go to a large macro hedge fund and they will need you more on advance trading for example. So we really see ourselves as a consultative partner to our clients. As you said, we have lots of assets, and sometimes it's a little complicated for clients to understand where everything fits. And that's where I come in and offer something that's going to be choosing from these assets the best solution to the clients.
Jamie: So we recently did another episode on this series with TORA, also a part of another stock exchange group. And one thing they were mentioning is that to differentiate themselves, more hedge funds were going global. And with that came the need for traders in different time zones. And therefore, TORA was a really good investment solution for them. What other trends are you seeing from hedge funds? Because as Mithra was saying earlier, competition is only going one way as assets under management keep rising. What are the questions are hedge funds coming to you with, in terms of how they're trying to change the direction of their hedge funds to capture just those increments of alpha, Mithra?
Mithra: What Quentin said made a lot of sense in the fact of being consultative for your clients, that's what being holistic in your service offering really means for them. I think if you can offer the best price and margin, but you can't settle their trades because you can't connect to their outsourced trading provider, then it's a little bit of a moot point. You're not letting them run their business. So, a few things that I think hedge funds are focused on now. One is, and Lauren pointed this out, is making sure that the sustainability of their provider partnerships is really front and centre. What we have seen is a movement away from who is just giving me the lowest price and margin to how can both sides be relevant to each other. There was a quote I read, and I can't remember who said this, but basically it was a course on negotiation. And they said the sign of a good negotiation is not one party thinking that they won absolutely over the other. The sign of a good negotiation is both parties wanting to come back to the table over and over again. So, if one side feels like they have been raked over the coals or they've been taken advantage of, they're not going to want to do business again. So, I think what you're seeing with hedge funds now is this understanding of we want our prime brokerage relationships, our trading relationships, our data relationships, everything to be long term partnerships. So how do we make sure that both sides are behaving in a mutually sustainable fashion? And I would say that they're all really focused on that.
Jamie: I was going to just ask when you're having these negotiations, do you internally give each client a credit worthiness depending on their strategy and what they're investing in? And do you ever have a moment where, for example, you say, listen, we can lend to you at three and a half times, but you can't be dealing in third-world government bonds. Whatever it is. Is that the kind of negotiation you'll have? Because you'll say, listen, I see where you're investing. I've seen your liquidity profile. We can't lend to you at this amount, but if you get rid of this, we can lend to you at that amount, Lauren?
Lauren: Look, I think it's an interesting one. Just to go into the boring nuts and bolts bit for two seconds, but just to help kind of demystify some of that stuff. Banks do look at every individual client. They have credit ratings and credit assessments and credit due diligence across all the clients. So, there's this typical lending profile, typical credit worthiness profile that absolutely does exist and that's there and it's there across all clients. You then have these other layers that build up on top of that. So, in particular, in the prime world, we'll have an in-business risk function who very much acts as you've described. So, it's really about again, looking at portfolios, looking at exposures within the overall credit appetite and saying, yes, I'm willing to lend more against something that's higher grade, something that's more liquid versus something that's less liquid, that's lower grade. And absolutely the margin, the price, the limits, the appetite all come together as a single package that reflects the appropriate return on risk. Because ultimately that's what we've got to deliver. We absolutely do take risk and these businesses do have risk embedded in them. But the key is making sure that we can generate the right return on risk. And then again, I think to a point sort of Mithra made around operationally being able to connect, again, if you can't provide clients with the right exposure, the right leverage at the right price point, then it's also moot. So you do have to work together to understand the sensitivity points on both sides to be able to put up the right amount of leverage at the right price point that makes business happen.
Mithra: I would add, I think this is where firms like LSEG and teams like Quentin’s really come into play also, because when you look at overall worthiness of do I want to do business with this client? It's also that operational due diligence that Lauren talked about. If you do all this upfront risk analysis, but then a client can't get you the right monthly risk reporting or quarterly risk reporting because their administrator or accounting firm can't provide it if you don't get audited financials in time. If their y're trading counterparty if they're outsourced trading provider is constantly having outages. If they don't have the right security masters, all these things start to matter because then this is in the construct of the overall relationship, your ability to have a good handle on what is happening at that client is then impaired. So, we work very closely with partners like LSEG so that the ones that we have greater comfort with are naturally, that factors into the overall client relationship and the client assessment.
Quentin: Just jumping on that point. You mentioned TORA, Jamie that LSEG acquired, just over a year ago. One of the big thesis that's proven right is they were really good at what they were doing, but they were independent and niche. So clients would just think about them in one aspect of what the business was. And now that they're part of a group, we can go to clients with that holistic solution. And have a large company behind you that's listed on the London Stock Exchange, that you can trust and that you're doing a lot of other business with, so that really lowers that risk, that counterparty risk, if you will, or that operational risk for our clients given who we are.
Jamie: Quentin, if I could ask you. We're in a higher interest rate environment now, and I was an equity long short guy. So, I really just viewed the whole hedge fund world through those glasses. But are you starting to see hedge funds move into very different strategies and even long-short equity hedge funds move into other strategies like macro like multi strat. Are you seeing more people looking to start credit hedge funds for example, even crypto hedge funds? What other strategies are you seeing hedge funds move into?
Quentin: Absolutely. And don't hate me for it. I'm an equity guy as well by trade, there's a lot of us. We see a lot of clients, and that comes back to what I was saying earlier. It's good to be able, even for the smaller funds, even for the small launches, to offer everything. So they know that it can grow with you. So our clients who want to pivot from one strategy to the other, they can. We will have the data, we will have the tools, we will have the API and the automation that they need. In the equity space, we've seen a lot and we still see a lot of systematic funds, coming in, but there is still a lot of long short. And then you can move into different overlays, make an overlay as a strategy on its own. So we do see clients moving in different directions. And I think that's what they should be doing. And certainly, you don't want the bank relationship. And I don't want to talk for Mithra and Lauren, but I think that's why a lot of the banks are viewing the clients as multi-asset now, you don't want to impede their growth because it's a different department. So we do see that trend quite a bit and that could reverse. But we definitely want to be seen as a partner that can do it all so we can accompany the clients, in size but also horizontally in different asset classes or different strategies.
Jamie: I'm interested in asking the same question to you guys as well. Lauren, perhaps you want to take this one.
Lauren: It's a really good point in terms of the very nature of hedge funds are, their agility in terms of their ability to deploy capital wherever there's alpha. And I think, a bit like the model that Quentin's described we're sort of very similar in terms of we want to meet clients where they are, in terms of where they want to deploy that capital. And we really do sort of see, in particular as that rising interest rate environment that you pointed to, again, like expansion of exposure to credit for your equity, long, short guys who feel like they have an edge in understanding the companies because now you start to have a bit more dispersion in that space and you start to see winners and losers. And that's the natural hunting ground of the more fundamental guys on the systematic side, again, you've got this pursuit of alpha because raising assets isn't typically a problem. It's finding new Alpha frontiers to invest. That's the challenge. So again, you start to see those guys pushing out into other asset classes, there's lots of news and sort of press around electronification of different markets, whether that's credit and so forth. Again, the world tries to seek alpha where there's opaqueness or where there is a lack of liquidity. So, we do see those changes. I agree, big firms that are multi-product multi-service. Our aim is to be able to meet clients where they are, as they expand and shrink and deploy capital. One of the benefits of being at Citi is obviously our ability to meet them there. So, I think that's quite similar to the LSEG group as well.
Jamie: Lauren, sticking with you, forgive my ignorance, but is there a point at which a hedge fund just becomes too big, like do they have to remain kind of a certain size? And at some point, they're like, okay, I'm not doing any more long-short equity. I need to look into other areas because I can't have positions that are so big. It just doesn't work for my risk-reward profile.
Lauren: It really depends on whose point of view. My point of view, absolutely. I think, there is right sizing in terms of strategies. That's not a hard dollar limit. It is a function of how the market itself grows and shrinks and therefore what percentage of that market you can be, how much alpha you can extract. I was actually meeting the other day with a couple of clients, and it was one of the key topics of conversation was, when are you too big.
Jamie: And what’s the answer?
Lauren: I think it really comes down to again from their own risk reward measures. When they stop generating marginal alpha at the right rate. And that's when you really know, okay the alpha is quite thin up here. It's almost like, climbing Everest. The alpha is very thin up here and therefore the marginal risk reward of that alpha is too low. I do think that there is the right sizing of different strategies. It's not a fixed dollar amount. It's more probably a percentage of market, percentage of exposure. Some are better at managing alpha on very large notionals, and some do better at being really agile and small and extracting alpha on much smaller notional. So, there's no right or wrong. But I think there's definitely, a point at which the marginal alpha probably doesn't make a lot of sense.
Mithra: It's the first question we ask when putting my cap intro hat on when a manager is looking to raise capital, it's one of the first questions we ask them, how big do you want to be? Because I think it is important for a manager to have a sense of that. And again, there may not be an absolute number amount, but it comes down to the point that Lauren said, which is can you continue to generate alpha? Can you continue to meet the investment objectives that you stated to your investors? Let's not forget that at the end of the day, hedge funds are managing money for pensions, university endowments, family offices and so vast swaths of the population might think that they're very removed from hedge funds. But, if you have a pension, a public or a private pension, if you're, attending a university anywhere, chances are you're touched by a hedge fund in some way. And so people love to paint the whole hedge fund industry with a broad stroke. And what Lauren's saying, and I completely agree, is that it depends. It's highly complex. It depends on your ability to continue generating alpha, your ability to continue returning the investment objectives to your shareholders, and your ability to maintain partnerships with those providers that will continue to support you as you grow. And that's not an insignificant point. That's why, you mentioned prime brokerages as the linchpin. And that's what it is, I always say, if a person’s walking down and you keep carrying more weight, can your back continue to support you? And that's different for everybody. And for me today the answer is no. But for others that may be different.
Jamie: We should say that Mithra had a bad back this morning before recording. So that would explain, but Mithra sticking with you because are you surprised how much the hedge fund industry is still growing? I mean, I was shocked to see that it's doubled since 2017. I found that incredible. And as I learn more about how much money is chasing, in inverted commas, the same trade. We haven't spoken about AI yet, but of course, that's a major influence in this industry, particularly when it comes to quant strategies. Can this industry continue to grow at the rate it's growing? What's going to happen to fees? What areas can they move into?
Mithra: [00:24:26] So first I'll touch upon the question about am I surprised? The answer is yes and no. I mean, I am, I think if you look at hedge fund returns over the last ten years, they've been okay, not great. And so, is the pace at which they've grown commensurate with what you'd expect those returns to be? Questionable. But if you look at what's happened in the markets up until 2020, 2021, you had a decade where equity markets were just going up and everything, and there was very little opportunity in the fixed-income credit market. And so, if you're an investor sitting back, you need diversification. You can't be over-allocated just to public equity. Private equity markets are also getting very hot. So, you want to make sure that you had some of your portion in liquid strategies that offered diversification, uncorrelated returns to equity markets, etc. So, from that standpoint, you had this need for diversification and there’s need for alpha that was really driving a lot of the growth in the hedge fund space. I would say. Now the question of where does it go from here? Can it continue to grow? I look at it more as can the industry continue to sustain the number of hedge funds that are there right now? And the answer is probably not, because it's, as we talked about earlier, it's hard to raise capital. It's hard and expensive to run a hedge fund. And it's incredibly hard to find talent. So, I would say that I think you're starting to see with the markets in 2022 and especially in this year, you're starting to see separation in the hedge fund space. So, I think the total assets under management in the hedge fund space probably won't change significantly. But the number of players there I think will shrink and to some extent has to shrink over the next couple of years because I just don't think the industry can sustain so many people. Again, it's where's the marginal alpha coming from? And if you can't demonstrate that, and if you can't hire the talent to do that, if you can't continue generating those returns, I just don't see a path forward for you.
Jamie: Quentin, really the same question to you, but I just wanted to throw one in there. Recently, Jim Chanos, who's probably one of the most famous short sellers, in this business, closed his fund, and we never really read about people closing their funds. I mean, unless you're Jim Chanos, of course, but do you see some smaller funds just shutting up shop? It's not their environment. I know, not that long ago, there was more of a move into things like private credit and private equity. So really, same question to you, Quentin, which is like, do you continue to see growth in this industry and how?
Quentin: So we still see growth in the industry. We talked about the trends earlier, one trend that we didn't discuss is the multi-manager trend as well. There are a lot of hedge funds that are becoming multi-manager. And by and large, that means they will compete for fund managers to come in and to run a pot of money for them. So that entails different strategies, different asset classes, once again. Do we see funds going up and down? Yeah, absolutely. There have been less launches, especially in AsiaPAC last year. Because a lot of the strategies have shifted. Also, perhaps some of the returns were not as good, some of the asset owners were, a little more careful, before they started something new. But we're certainly seeing some more launches now in different spaces, as we discussed. It's a healthy start and stop of funds. If the strategies don't work, this is an end investor's money. And either that investor may be asking back for their money or the fund itself maybe may be saying in this environment, it's not going to work, we may shut down and we may start something else at a later stage.
Jamie: Quentin, what about what Mithras said about, the search for talent? I've also read that's a real problem for a lot of these funds. Is talent being lost to other sectors like tech, or is it being lost to computers, or do I need to come out of retirement because they're now paying people well, and I should come back in. Where are people looking for talent now and is it out there?
Quentin: I think you should get back in.
Jamie: I'll give you my commission later.
Quentin: Talent is always being looked at in the business. I think Mithra is closer to than me as part of the very early stages of capital formation and hedge funds, putting, strategies together. But even us where we see we do get a lot of ask, right? There is always a need for CEOs. There is definitely a need for PMs with proven track records. Especially in difficult times. People are looking for PMs that can manage your strategy, sustains up and downs or has the right angle, to where the market is. So talent is big. I don't think necessarily that a lot of people would be moving to another industry like you've seen in tech, for example. You do see advancements in tech definitely helping, especially with productivity. Good talent is always on the lookout in this business, everywhere in the chain. With us, with the prime side, with our clients. Everybody's looking for good talent all the time.
Mithra: I think to add to what Quentin said, part of the reason the war for talent has gotten so fierce is going back to the point about it's hard to run a hedge fund. So if you are a talented stock picker. So, Jamie, if you want to come back in, your choices are you can start your own firm, hire your own analyst, CFO, COO, do all the provider choosing and find a place and all the stuff. And then you have to go out and market and make money. And sSo, the odds are, nearly insurmountable. That's choice number one. Choice number two is you just get a big bonus check and operations are taken care of. Trading is taken care of. Marketing is taken care of. Your desk is taken care of. All you have to do is trade within a very tight limit and make a lot of money. So that offer is very very compelling for a lot of people, because if you are a hedge fund, if you're a hedge fund manager, you are a business owner, do you want to be a business owner or do you just want to be a portfolio manager? And so, I think when people are given that choice, a lot of them choose that route of, I just want to be a portfolio manager. I don't want to deal with, coaching and mentoring and hiring and I don't want to deal with, oh there's a flood in the office on a Saturday, and someone has to go deal with it and all that stuff, right? But I think what we are seeing, though, is that, that's a very specific skill set, not for everybody and so I'm curious to see how this changes over time. But that's one of the reasons where the talent wars have gotten so heated, because if you're a talented portfolio manager or trader, the options for you to make a lot of money without being a business owner, seems to be an easier trade for people.
Jamie: [00:31:22] For those people listening who want to try and get employed as a prime broker on a prime brokerage team in cap intro, what kind of qualities do you think they need and what do you look for?
Mithra: I would say first and foremost a customer service mentality. And I know we didn't touch too much upon AI, but at the end of the day, being in the service provider ecosystem is being is a relationship. And it's a partnership as we mentioned. So, you have to have that customer service mentality. You have to have a solutions-oriented mentality of helping your clients solve problems. You have to be intellectually curious because Quentin and Lauren both mentioned hedge funds are changing and growing. You have to meet people where they are, and it helps if you have a sense of where the market is going and you have to be intellectually curious and you have to be willing to go outside your comfort zone because it's industry is changing a lot, and what people need and what you were doing today might look very different from what you were doing yesterday. And I think those are the three main characteristics. Obviously, I always assume that everybody that works in this industry is smart. They have an interest in the markets. They know what they're doing. But what I would always say is this is not just for the business or economics major that can do really well. I do think for the next generation, one of the things that I think if you can deal with AI and know your way around AI pretty well and the next wave, I think that's going to be really helpful no matter what profession you're in. I think people like me who fumble with the PowerPoint are probably less relevant in the future of this business. I don't think you can get away with that much anymore. But, I would say, customer service mentality, intellectual curiosity, and then just really be willing to put yourself out of your comfort zone. So, I know that's vague, but I think it's very important for our business.
Jamie: Well, Lauren, I did have one last question for you. Obviously, in 2008, we had a pretty major banking crisis, but earlier this year we almost had a banking crisis. The likes of SVB and First Republic. I wondered to what extent did that or those incidents change things in the prime brokerage world, if at all? And maybe to that extent you can touch on regulation and where we are today.
Lauren: I think in particular, on those events they act as obviously a good reminder, to all market participants in terms of, my favourite boring terms, stability, and predictability as well. So, I think at the end of the day, they just in the prime brokerage space act as a really good reminder about managing various risk factors. In the business, again, I think people think of the prime brokerage and prime services space as particularly low risk spaces. But again, you're putting those two events you mentioned aside, you look at several other events that have come up around the space over the last couple of years. Combined with the events of earlier in the year. Just really good reminder that, prime brokers are not immune from risk events and risk issues. So, I think that is a key thing. Regulation, I think, there's a big, big smile on my face whenever I say the word regulation, it's a really important part of the landscape and the industry. And I think people have to get on board with that, that's here to stay and if I sit back and look, obviously we've got global regulation. We've got, local regulation as well as a bank that sort of operates, in most places around the world. If you sit back and you and you think about it, there's sort of three kind of overarching, areas around regulation. Obviously, one is safety and soundness, and making sure that banks that operate, whether it's in the prime space or in, other key areas of the market, have the right set up, the right resources to be able to sort of, be safely and soundly in those businesses, the right risk, risk limits, risk profile, risk management toolkit. The second one, is really resilience. You go back and you think about Covid, and you really start to understand how important the financial system is to the real economy. So, a lot of regulation really focused on regulatory engagement around resilience and being able to navigate and have continuity, during crisis periods. And so, again, that's a big area of focus, and rightly so. And I think the third one is then really, different local agendas or local areas of focus and that gets country and region-specific, depending on what the regulators are most focused on. But what's interesting and good as well, is you have a lot of key regulators talking to each other. And so again , the thematic that you see whether you're in Europe or you're in Asia or you're in the Americas, is a lot more, sort of consistent. And then certainly sitting on our side becomes easier to understand what's important, what the expectations are, and then rise to that occasion. But it's not going away. Let's put it like that. And if we all understand what the themes are and we work buy side, sell side, and service providers, to keep our credibility and partnership with the regulators strong. I think we end up with a more sound system and more predictable, understandable, relatable regulation as well, which is good for everybody, to be honest.
Jamie: It sounds like more coordination in regulation can only be a good thing.
Lauren: Yeah, I think so. I think just with the volume of regulation, it's really important that, we understand and can implement it in a timely way. But again, it's consistent. It's very difficult when you're trying to navigate two pieces of regulation that don't jive with each other. That can be a challenge.
Jamie: Yeah. Lauren, thank you for your fantastic answers. A big thank you to Mithra and Quentin as well. Lauren, if people do want to get in touch, are they okay to reach out on LinkedIn or something.
Lauren: Yeah, by all means. Please do reach out, happy to connect. I think it's important that more people understand this space, and happy to connect.
Jamie: And Mithra, Quentin, it’s OK for others to get in touch with you through LinkedIn as well?
Mithra: Absolutely. You can find me on LinkedIn.
Quentin: Same here. Absolutely. Do get in touch.
Jamie: Mithra. Lauren. Quentin, you've been such fantastic guests. Thank you so much for your time.
Lauren: Thank you.
Quentin: Thank you.
Mithra: Thank you so much.
Jamie: So thanks everyone for listening. That was another episode of Hedge Fund Huddle. And if you don't already like or follow us, please do so now. It's exactly how you hear about our next episodes. Also, we want to hear from you. So again, feel free to write to us or leave a review. The information contained in this podcast does not constitute a recommendation from any definitive entity to the listener. The views expressed in the podcast are not necessarily those of LSEG, and LSEG is not providing any investment, financial, economic, legal, accounting or tax advice or recommendations in this podcast. Neither LSEG nor any of its affiliates make any representation or warranty as to the accuracy or completeness of the statements or any information contained in this podcast, and any and all liability therefor, whether direct or indirect, is expressly disclaimed. For further information, visit the show notes of this podcast on lseg.com.
