Posts tagged “fixed income”

Leave it to John DiRocco, legendary pioneer in the securities-lending arena, to find a way to save security-borrowers time and money. It is a new marketing system called BorrowMaster, and it automatically compares borrow rates from different prime brokers.  The breakthrough of this system is not the information itself, but rather how now it becomes a cinch to access and analyze.

DiRocco’s firm, HedgeSpeed Technology of Wilton, Conn., charges about $10,000 a month for the software package and technical support.

“With the exception of the largest multi-strategy funds, managers don’t have such tools to monitor lending rates of every block of stock or bond they want to borrow,” said DiRocco, formerly the chief financial officer at hedge fund giant Citadel Investment Group. HedgeSpeed’s software tracks the securities-lending market over time, so managers know immediately when financing costs go up or down. Managers often don’t keep track of rate changes, and are surprised when they get a higher-than-expected prime-brokerage bill at the end of the month.

For large hedge fund operations, BorrowMaster can help portfolio managers keep track of which traders are shorting which securities—a feature prime brokers don’t usually offer. Such information can be useful to a portfolio manager whose traders have separate P&L statements, so each trader can be charged appropriate borrowing costs. For a complete description of the system, visit http://www.hedgespeed.com/docs%5CBorrowMaster.pdf

HedgeSpeed is pitching the product to firms with at least $300 million under management, although the largest hedge fund operators already have similar capabilities in house.

To market BorrowMaster, DiRocco recently hired Chris Sotell, previously a fixed-income salesman at boutique brokerage Rafferty Capital. Sotell joined late last month as senior vice president and director of marketing.

HedgeSpeed, founded by DiRocco in 2005, also advises hedge fund managers on liquidity management and financing options. DiRocco first tried to market BorrowMaster in 2007, just as the credit crisis was unfolding, then postponed the effort. DiRocco believes managers will be more interested in the technology now because borrowing costs have risen since financial markets froze up.

DiRocco practically invented the notion of brokering securities-lending transactions between prime brokers and fund managers. In 1990, he co-founded London Global Securities, a stock-loan business backed by Greenwich, Conn., hedge fund operator Paloma Partners.

He is best known in the hedge fund world as the former chief financial officer of Citadel, which he joined in 1998 with a mandate to cut the Chicago hedge fund firm’s borrowing costs. He later became chief financial officer of Balance Asset Management, an event-driven manager that shut down in 2007.

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