Now you have set out your stall in the US, what has the response been like?
Peter Volino: The response from our clients has been overwhelmingly positive. Currently, we have 112 repo counterparties and more than 81 securities lending counterparties in various stages of the approval process.
We are now executing orders off our agency desk and recently launched our prime brokerage and correspondent clearing service. Our time-to-market has been what we had expected.
Thankfully, because we are owned by South Korea’s leading financial services firm, Mirae Asset Financial Group, we have had access to all resources required to undertake and successfully complete our business launch. For example, we launched with $260 million in total net capital. We also now have 60 employees.
In addition, Mirae Asset Securities (USA) has partnered with FIS on the technology front and we are using its Securities360 platform. Securities360 is the first-of-its-kind, fully-integrated solution that automates and streamlines critical tasks from the front, middle, and back office into a single platform, and it includes portfolio accounting for our hedge fund clients. This facilitates operational efficiency and reduces risk—two big competitive advantages for our clients and ourselves. Lastly, we have chosen BNP Paribas to provide us with global custody services in the Americas, Europe and Asia. This relationship will allow us to meet the global settlement and asset servicing needs of our clients.
Have you established all the necessary clearing and CCP relationships?
Robert Akeson: Yes. In addition to being members of the Depository Trust & Clearing Corporation, Fixed Income Clearing Corporation and National Securities Clearing Corporation, we recently became members of the Options Clearing Corporation. This will also expand our reach within the world of equity finance by facilitating our ability to deal with a broader range of counterparties. Such arrangements will result in access to greater supply and balances.
Can you tell us more about your most recent move into prime brokerage?
Volino: We are targeting emerging and small hedge fund managers and proprietary traders. These clients have been most adversely affected by Basel III and the US Dodd-Frank Act and the ensuing industry consolidation. We are also working with introduced prime brokers who support smaller managers.
In addition, because of our balance sheet, we are talking with larger funds that are seeking a significant and attentive counterparty for their secondary prime brokerage relationships.
Mirae Asset Securities (USA) offers a fully-integrated prime brokerage platform capable of providing tailored solutions around portfolio reporting and analytics, risk management, and trading.
The platform focuses largely on supplying intelligent data to support our clients’ strategies. Taken as whole or in pieces, this platform offers hedge fund clients operational efficiencies and risk mitigation tools.
In addition, we can provide hedge funds with a wide range of advisory services to assist them in launching and operating their businesses, while better preparing them to meet their operational due diligence needs. These services span areas including office space, enterprise technology, cyber security, compliance and human resources, and so on.
Recently, we hired Stephen Murphy to lead our prime brokerage, correspondent clearing and agency execution businesses. Stephen has extensive sell- and buy-side experience with Weiss Multi Strategy Advisors, Neuberger Berman and Merrill Lynch.
Since you have become operational, have there been any notable milestones achieved?
Volino: We are very pleased with the rollout of our businesses to date. As previously discussed, we expected the financing businesses, repo and securities lending, to launch first, which they have. Our balances have risen significantly and are now greater than $30 billion. Both businesses continue to add counterparties. The prime brokerage and agency execution businesses have also become operational and are taking on new clients at a brisk pace.
What other markets are Mirae looking to expand into?
Richard Misiano: We intend to continue our penetration into the Canadian and European markets. This plays well to our global diversification strategy; remember the Mirae family operates in 15 country markets. In particular, we view the Canadian and European markets to represent excellent fits with our firm and business model.
Can you tell us more about the Mirae Asset Financial Group and its strategic vision?
Misiano: Mirae Asset Financial Group is South Korea’s leading financial services firm, operating in 15 country markets: South Korea, Australia, Brazil, Canada, China, Colombia, Hong Kong, India, Indonesia, Mongolia, Singapore, Taiwan, the UK, the US and Vietnam.
As of 31 December 2016, the group’s asset management business had approximately $342 billion managed assets worldwide. Its various broker-dealer subsidiaries and affiliates have approximately $5.8 billion in capital. So, we have significant and increasing global market breadth and depth.
Strategically, Mirae Asset Securities (USA) is an extension of the formidable asset management and brokerage franchise created by the parent. For example, the parent is now considering ways to enter the asset allocation business in the US with hedge funds and investment advisers. The plan is that these assets can be custodised at Mirae Asset Securities (USA), which will enhance the information flow to, and comfort level of, non-US investors.
What can Mirae Asset Securities (USA) offer its parent?
Akeson: We see the benefits comprising the following. First, as earlier noted, we have begun operations with a significant permanent capital base. This reality, combined with the fact that we do not roll up to a bank holding company, gives us tremendous added balance sheet ‘runway’ for our repo, securities lending, prime brokerage and correspondent clearing businesses. We will not be hobbled by Basel III and its ratios like other firms. Because of our globally recognised parent, our prime brokerage offering has the feel of a larger firm, but the nimbleness and attentiveness of a boutique.
Secondly, because of our parent, our clients will have access to a very distinctive foreign research product and related corporate access capabilities. We have a written content product covering a broad range of companies in South Korea, Vietnam, Indonesia and Brazil. We also have strategy pieces addressing East Asian market trends and beyond, written out of our Seoul headquarters.
Finally, as the firm enters the asset allocation business, additional synergies will emerge with our prime brokerage and financing businesses and their clients.