ENSO
Matthew Bernard
06 October 2015
Matthew Bernard, partner and co-founder of ENSO, explains what the company can do for hedge funds and prime brokers, now and in the future
Image: Shutterstock
What is the background of ENSO? How did the company come about?
ENSO was founded on the backbone of innovation. In 2011, Matthew Bernard, Michael Gentile and Dwaine Alleyne, all of whom have deep backgrounds in designing technology platforms and proprietary algorithms for some of the world’s largest banks, including Barclays and UBS, saw a critical need to improve the way that hedge funds and their counterparties communicate. They set out to build a platform that helps optimise the exchange of information between hedge funds and prime brokers.
The result has been a transformation of the hedge fund-counterparty relationship, providing the community with a fully hosted portfolio and treasury workflow solution. ENSO enhances the value of these relationships by providing informational alpha that uncovers collaborative opportunities.
Today, ENSO employs more than 70 professionals in the US and UK and has more than $800 billion in client assets under advisory.
ENSO is also currently backed by ICAP, a leading markets operator and provider of post-trade risk mitigation and information services. ENSO received an initial investment in May 2013 and a follow-on investment in October 2014.
What does ENSO offer hedge funds that its competitors do not?
ENSO provides a comprehensive view of hedge funds relationships across multiple prime brokers and counterparties. We deliver data and insight on counterparty credit risk, collateral management, portfolio financing and treasury to our clients through various mediums on a daily basis.
ENSO is a contributory database and our clients get access to unique amalgamated datasets that add value to internal traders, portfolio finance people and treasury teams at the fund.
ENSO also has a dealer platform called the ENSO Color Portal. ENSO has created a technology platform that allows each of the participants to communicate and exchange information and make use of this data through one cohesive platform. Prime brokers are able to share information, advertise axes, disseminate commentary and narrowcast and target clients that are part of our growing community.
In today’s ever changing regulatory environment where balance sheet is a scarce resource, both dealers and clients need to work together to improve and enhance relationships. ENSO is providing a platform that creates this connectivity.
What are the main hurdles facing hedge funds and how they interact with their counterparties? How does ENSO tackle these challenges?
Both market and regulatory pressures, in some cases, have increased costs of prime brokerage for hedge funds, and in other cases have caused friction between both buy- and sell-side counterparties. The business of extending financing to hedge funds once was a very attractive and stable business for the prime broker, yet today many are dealing with regulatory pressures that cause balance sheet inefficiencies that need to be rectified across the franchise and ideally at the client level.
The prime brokers that are best suited to handle this new environment have been investing in their technology platforms for many years, while others are now allocating resources in effort to understand their business to a very granular degree, and create efficiencies and opportunities to share with their clients as means to improve profitability and client profiles.
ENSO sits in the middle and solves the communication, data management and optimisation issue for both the dealer and for the fund. We have created a utility to be consumed and used by the street. Both buy- and sell-side counterparties can be part of the same platform. Dealers can use our platform to advertise balance sheet opportunities to the funds on ENSO’s Core Platform.
Funds are alerted to these opportunities through our portal and use the tools that we have created to optimise their positions across the street. Both sides are alerted, and both sides communicate and cohesively work together to find the most optimal opportunities for each party.
Managers face a constant deluge of information about potential trades and the costs of financing those trades from an array of prime brokers. Sifting through this information is costly, as it takes time and resources away from what hedge fund managers do best—making investment decisions. Adding to this complexity is a wave of new regulations, including Basel III and the US Dodd-Frank Act, which have forced many brokers to rethink the way that they interact with their hedge fund clients.
Our proprietary technology and software platforms, namely ENSO Core and ENSO Color Portal, seek to address these challenges from both the hedge fund and broker side.
For hedge funds, our services allow managers to customise what commentary and securities pricing information they receive, thereby optimising the investment decision-making process and making them better clients to their brokers. For brokers, we provide the ability to share position lists with the ENSO hedge fund community, which further connects the supply of and demand for collateral.
Will ENSO expand beyond the hedge fund demographic?
ENSO continues to build out its infrastructure and technology offerings based on clients’ needs. We recently hired CTO Michael McMahon to establish additional structure to our technology efforts. Similar to how ENSO started, we have recognised an additional gap in the market and highlighted many emerging managers that can also benefit from access to our technology and analytics.
Expanding our offering to assist these managers with the same high quality operational insights and alpha-generating analytics is just another solution that we can provide the street.
What do you do for prime brokers?
As our ENSO community expands, we plan to enhance our broker-dealer offering on the platform. ENSO will be providing dealers with feedback and reporting which will summarise their overall platform usage and effectiveness.
ENSO also has plans to offer our clientele new shared utility solutions to solve for the non-differentiating aspects of the high-cost post-trade inefficiencies that are arising out of the recent regulatory hurdles.
What does ENSO have in the pipeline for 2016?
Over the next year, we plan to allocate our resources globally to develop innovative analytics and pre- and post-trade services to our ENSO community, engaging both the sell side and buy side.
We see a bright future for ENSO in the next year and for many years to come.
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