BNP Takes New Approach to Cap Intro

January 10, 2018 (HEDGE FUND ALERT) – BNP Paribas’ prime-brokerage division has dismantled its capital-introduction unit, opting instead to outsource capital raising services for its hedge fund clients. The Paris bank laid off three of the five members of its New York cap-intro group at yearend. Another transferred to a prime-brokerage sales job. Tom Mahala, who led the team, departed late last year for a position at Layton Road Group, a New York firm that now has a contract to provide cap-intro services for BNP’s prime-brokerage clients.

At Layton Road, Mahala is working with another former BNP cap-intro executive, Jim Campbell. The firm employs six professionals overall, with offices in Dallas and Gladstone, N.J., in addition to New York. BNP is paying Layton Road an undisclosed fee to facilitate meetings between hedge fund managers and prospective investors — a less-costly arrangement than maintaining an in-house cap-intro team. BNP is Layton Road’s first client.

Mahala hopes to persuade other prime-brokerage businesses to outsource their cap-intro services to Layton Road. In addition, the firm aims to serve smaller hedge fund managers and commodity-trading advisors who don’t have access to capintro offerings from the big banks. One prime-brokerage executive said he wouldn’t be surprised to see other banks outsource their cap-intro functions — not necessarily the biggest prime brokers, such as Goldman Sachs and Morgan Stanley, but second-tier banks and brokerages looking to boost profitability. “I’ll bet you a dollar there will be at least two if not three others that do this,” he said.

BNP ranks 12th on Hedge Fund Alert’s list of the leading prime brokers, which encompasses banks and brokerages catering to fund managers that report to the SEC. Mahala ran BNP’s cap-intro team for about six years. He’s best known for his tenure in Bear Stearns’ once-formidable prime-brokerage department, where he managed relationships with some of the bank’s biggest hedge fund clients. Also on board at Layton Road are David Fiegenbaum, who most recently worked at Lily Pond Capital, which provides working capital and marketing help to emerging alternative investment managers; John Service, previously head of investments at family office IGW Trust; Dan Sheridan, who last worked at recruiting firm Frank Recruiting Group; and Lindsey Douglas, formerly of third-party marketing firm Profor Advisors.

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