Hedge Magazine, June 2017. Original article p38-40.
Duncan Crawford, Head of Hedge Fund Sales in the Prime Services Division at Societe Generale Corporate & Investment Banking
The formal atmosphere of Societe Generale’s East London offices strikes a sharp contrast to the folksy Spitalfields Market downstairs. Duncan Crawford looks right at home under the tall ceilings in his elegantly patterned tie and monogrammed cufflinks, although the sharp look is offset by a slight sunburn – he’s just come back from Cervinia: “We skied in Switzerland for good snow, and crossed the Italian border for delicious food.”
Crawford knows how to get the best out of the options available. Officially he’s the Global Head of Hedge Fund Sales in the Prime Services Division at Societe Generale Corporate & Investment Banking – what this means is that he’s is a connector of people. Crawford describes it as being “a marketplace of information between investors and managers”, as his team works with investors to find the best additions to their portfolio. This doesn’t sound too remarkable until he describes how they’re going about it; the indices aren’t monthly but daily for one – the Societe Generale CTA Index now contains 17 years of futures trading data. The goal is for the coverage to become universal: “Our aim is to be able to report on 100% of the strategies that are out there within any particular strategy,” Crawford explains in his calm and soft-spoken manner.
The success of this ambitious goal depends on sophisticated technology, as masses of information is constantly uploaded into databases to produce custom client updates. But still, this is very much an interpersonal industry; in fact, their manager events are smaller than those of the competition, says Crawford: “It’s a very collegiate atmosphere. Our flagship event is over three days, and by the end, everyone’s spent quality time with everyone.”
It’s certainly exclusive, nods Crawford. “You might say we’re entrepreneurial because of our time horizon: it’s very much long-term. … Our oldest clients go back over 20 years. It’s a partnership arrangement, rather than a client-broker relationship.” The investors range from large sovereign wealth funds, to small family offices and sophisticated investors who have been allocating to hedge funds for over 30 years to pension funds who are just now starting to do so. The watershed event that changed this was the credit crunch: “Very few investors actually allocated to CTAs [Commodity Trading Advisors] prior to 2008; it was mostly long short equity hedge funds and relative value strategies that offered very high sharpes over short periods of time. These strategies were largely hurt badly in ‘08, whereas CTAs shot the lights out.” In recent years, Crawford has seen an improved appreciation of the place CTAs can have in more general portfolios: “You’re now seeing some of the slower-moving pension funds starting to allocate significant amounts of money to that space. A number of them are doing it for portfolio protection reasons, which arguably is a good reason to allocate to a CTA.”
As investors in greater numbers have woken up to the potential of this market, numerous low-fee alternatives have surfaced to vie for their interest. “Investors across the board, for the last few years, have been focusing on one main thing: fees. “Only alternative beta products have amassed huge amounts of money lately. Though the concern about these managers is whether in a period of stress, are they going to provide what investors are hoping for? If they’re a simple trend-follower, it could be a binary result.” Crawford is referring to the fact that trend followers are long equity markets when they are going up, so in the event of a crash they’ll lose money until they’ve managed to turn their positions around to short, which doesn’t happen overnight. But Crawford isn’t entirely negative on this new focus on fees, as it’s resulted in fresh conversations about what exactly investors are getting for their money. “If you’ve only got a flat fee, it’s in the manager’s interest simply to raise assets and performance becomes irrelevant,” says Crawford; with performance-based fees, the interests of the manager and the investor are better aligned.
Crawford grew up on a farm in Scotland. “I love the countryside. I love Scotland. I thought, I’ll come down to London and make my fortune in two years, and then I’ll go back to Scotland.” He laughs – that didn’t quite go as planned. Crawford studied agriculture and food marketing at Newcastle University – it’s a business degree, he notes, but yes, it was something of a left-field choice. “My view of university was always that it was meant to be good fun and not a time of particular hard work. It was a time of networking and making friends.” The hard work came later, Crawford adds: “But to be a broker is also to be a good networker.”
After graduating, Crawford went to live in Germany for year. This was in 1990, just after the fall of the Berlin Wall. “A friend’s father was in Berlin, working for the Army radio. He said, ‘Come to Berlin, it’s where everyone wants to be!’ So I did.” It was a very exciting time: “There were a lot of different people visiting Berlin. The city was overcome with East Germans, so there was no way I was going to get a job when I didn’t speak German. There was lots of bands coming to play – I saw the Grateful Dead. It was a lot of fun.”
One of the people who Crawford met in Berlin was the wife of the managing director of the Zurich office of Fimat, who encouraged him to apply for a job at the company’s London office. Crawford did this – but not before he’d stayed in Germany long enough to learn the language. Joining Fimat led to a remarkably long run at what’s technically been a single employment; Fimat, and Newedge which came about in 2008, were both part-owned Societe Generale subsidiaries, before Newedge was taken in-house in 2014. “4th November 1991 is my start date at Societe Generale as far as HR is concerned,” Crawford laughs. “It was, for me, one evolution from Fimat and Newedge through to Societe Generale.”
This variety is probably what’s held Crawford’s attention through a decades-long career at the same company. Fimat was “one of the smallest futures brokers in the world” when he started, with a pretty flat management structure. Newedge brought about “the opportunity to do pretty much what we wanted” – so if he had an idea he could run with it. This was how Crawford and his boss Philippe Teilhard de Chardin decided to carve out a hedge fund-focused business in 1996, by separating the pure futures execution for banks and institutions and a group that serviced asset managers in equity options they referred to as equity derivatives, from the Prime Brokerage team, which focused on both hedge funds and investors. “My view back then was, ‘If I had any money … I’d want to give it to a hedge fund manager.’ As far as I was concerned, they were the brightest fund managers on the street. It seemed like a no-brainer: this is the business we should concentrate on. So that’s what we did.”
Building Fimat and Newedge felt to an extent like he was building his own businesses, says Crawford – it’s a different world now, being part of a major bank. “There’s a lot more opportunities in Societe Generale than there was as purely Newedge. We’ve inherited their equity finance business – one of the biggest equity finance businesses on the street – and that’s enabled us to really start developing our equity PB [Prime Brokerage] business. … Now, the ambition is to become much bigger in the non-managed futures space. We wouldn’t have been able to do that if we weren’t in Societe Generale.”
So does Crawford still think hedge funds are attracting the world’s best and the brightest? “I think they are,” he says, nodding. “But the brightest kids have more opportunities in the tech world now. It depends how you’re put together, how your brain works. I think the entrepreneurial money in the hedge fund industry has largely been made.” The industry is entering a later stage now, says Crawford, with lots of consolidation, and smaller managers looking to join the big names. “It’s partly forced by regulation and the increased cost of entry; but also because there is less opportunity to develop new strategies.”
Crawford lives in Suffolk with his wife Helena and their three kids, who’re just entering their teens. “We have four cows and a calf, who was born a week ago. I do a bit of farming on the side. I have a horse and the kids have ponies, so we ride.” The circle of life lessons have been covered – the family eats the meat they raise: “We’ve had pigs, which the kids loved, so we were concerned there may be issues when we came to eating them. But they thought they were the tastiest sausages they’d ever eaten,” he laughs. The animals and the garden take up a lot of Crawford’s time – he likes doing practical things with his hands: “Being outside in the countryside is very refreshing.” Working with people is also Crawford’s favourite part about the job: “Understanding more what managers are doing and their strategies, and to be able to help investors achieve their goals in life. It’s very satisfying to be part of a success story.”