SDX signs up first hedge fund to digital SMA platform

Strategy Data Exchange (SDX), a business unit of Singapore-based SoHo Capital, is debuting the strategies from an asset manager designed to be tailored on its platform for robo advisors, private banks, brokers and third-party asset managers.

GlassBridge Asset Management, a New York-based hedge fund providing quantitative portfolios, will make its strategies available via SDX, which can sell them to wholesale channels in the form of funds, structured products or separately managed accounts (SMAs).

“The launch is imminent,” Robert Picard, chief strategist at GlassBridge, told DigFin. “At a time when many asset managers are struggling to provide alpha and with margin compression, we see technology as the silver lining,” adding the company deploys machine learning to drive strategies such as statistical arbitrage. “We’re adapting to the next generation of asset-management products.”

Distributors, online and traditional
Frank Troise, founder of SDX and a principal at SoHo, said there are about ten of the largest global fund management companies providing strategies to SDX’s “library”. But SoHo decided to debut its service in Asia with alternative asset classes, hence the rollout with GlassBridge.

On the distribution side, although SDX is appealing to private banks and other large financial institutions, Troise says he is also targeting robo advisors that are looking to beef up their offering beyond vanilla exchange-traded funds.

“Robo advisors in Asia can’t just be ETF stories anymore,” he said.

He says private banks and other wholesale channels will also want to tap SDX to build factor-based strategies to fill smart-beta or alternative risk-premia mandates. He is targeting some private banks in Singapore first.

Earlier this year, Singapore-based online wealth manager AGDelta announced it would work with SDX to source strategies. With GlassBridge, SDX now has its first manufacturers providing strategies designed for it. Troise says SDX already has a database of 1,100 strategies from traditional and systematic fund managers.

Bringing SMAs to Asia
The distribution of mutual funds in Asia is dominated by the biggest consumer banks and private banks. Brokers, independent financial advisors and others have limited offering, while some large asset managers struggle to get on banks’ shelves.

As a result, SMAs have not been a hit in the region, as the most powerful distributors haven’t felt a need to offer them. SMAs allow manufacturers – portfolio managers – to make strategies available for distributors or investors to download and tailor, as an alternative to commingled funds or investment bank-created structured products.

The extra cost of an SMA platform’s fees have also hampered efforts to get these off the ground. BNY Mellon attempted to launch SMAs in Hong Kong and Singapore in 2013, but shut the business two years later. Some former members of that team are still attempting to launch SMAs in the region.

Daniel Strauss, COO at GlassBridge, says one of the firm’s distinguishing marks is the fact that it is listed, so it has to report a lot more about its activities than privately held fund managers. “After Bernie Madoff, investors want more transparency,” he said, referring to the New York fraudster.

GlassBridge is also keen to customize its quant strategies. Most hedge funds offer commingled funds to all but their largest customers, and GlassBridge hopes SDX lets it sell its strategies to smaller distributors or investors, particularly as a means of entering Asian markets.

The asset manager is a unit of GlassBridge Enterprises, a holding company formerly known as Imation Corporation, which was first created as a data storage vendor (a business that continues in another GlassBridge company, Nexsan). The biggest shareholder in GlassBridge Enterprises is Clinton Group, itself a U.S.-based quant investment advisory firm, which provides some of the technology behind GlassBridge’s work.