Following equity research and cash equities specialist AllianceBernstein and derivatives and prime services firm Societe Generale launching its equities and research joint venture in April, The TRADE delves into the new setup and future outlook for ‘Bernstein’.
The new JV is set to enable Societe Generale to offer clients a suite of global services across the equities value-chain, ranging from equity and macro research to agency execution, equity derivatives, prime brokerage and equity capital markets offerings.
“With high-quality research on over 1,000 stocks, Bernstein is a pure-play provider of trusted research and execution that helps investors generate insight, alpha and exceptional value for their clients around the world,” explained Hatem Mustapha, co-head of global markets activities at Societe Generale in a social media post last week.
The team
The JV, first reported back in November 2022, is set to operate across 16 countries, with key hubs in: Hong Kong, London, Mumbai, New York, and Paris. Due to the global scale, the new entity has understandably led to a rejig of the operational set up at Societe Generale and AllianceBernstein only where there was a duplication of offerings.
Read more: AllianceBernstein and Societe Generale to partner on cash equities push
Combining these two entities across Europe meant that potentially hard decisions were on the table when it came to bringing the similar platforms and offerings together.
This combination was a particular focus when it came to research and trading, and primarily the case for the UK team, The TRADE understands. However, on the trading side disruption was reportedly minimal.
The JV now has one unique trading team covering both high touch and low touch per region – in the US, Europe, and Asia, respectively.
In the US, most of this team hails from Alliance Bernstein, The TRADE has learnt, whilst in Asia and in Europe the teams are a 50/50 split of both Societe Generale and Alliance Bernstein’s existing teams.
In a joint announcement earlier this month, the two firms stated that the ultimate objective is for Societe Generale to eventually own 100% of both entities after five years with AllianceBernstein exiting – an arrangement which had been on the table since day one, The TRADE understands.
Senior executives for the JV have already been announced, with previous chief executive of Bernstein Research Services, Robert van Brugge, having been named chief executive of Bernstein and Stephane Loiseau, previously head of Societe Generale’s cash equities business, appointed deputy chief executive.
The priorities
Speaking to The TRADE about the main focus for the JV going forward, Loiseau says that from Bernstein’s perspective, the priority is equity prime brokerage.
“It is definitely the biggest wallet in equities. When you look at the global picture, cash equities is a small sliver in comparison and currently the two are connected so now we’ll finally be in a position where we can build that as a product globally.”
Loiseau added that the joint venture provides the opportunity to be relevant globally and across the bigger sway of the equity chain.
“Societe Generale has obviously very strong expertise in derivatives. So, once you put these two things together (research and cash equities with equity derivatives and prime services) you have the scope and expertise to offer world class content (e.g. research) and a leading global trading platform.”
Read more: When it comes to desk set-ups, buy-siders are readjusting how derivatives fit in
The combination of the two offerings poses an important question as to the migration of the back office and trading systems.
Quant trading and algos are the key focus for the new entity going forward, The TRADE understands. Bernstein’s setup is based on Societe Generale providing clearing and settlement services, however, both firms’ trading systems are set to be kept in place for the time being.
A review process is expected over the coming months and years.
“Certainly, operating two trading platforms is not necessarily the best from a cost perspective. But, with this approach, we’ll be able to do that with full knowledge about the advantages and disadvantages of each platform […] We feel that keeping the two IT stacks was the best option to minimise disruption for clients,” explains Loiseau.
In terms of the JV’s technological focus for the time being, algos are the key focal point. Bernstein is aiming to grow their footprint and reportedly plans are in place to launch two algo stacks in the next couple of months.
Furthermore, Loiseau tells The TRADE that one of the key strategic differentiators for Bernstein will be from the quant trading perspective. The firms intend to leverage their newly combined large team of quants and developers – “we’re much more relevant than each entity was separately”.
The clientele
While AllianceBernstein and Societe Generale had a previously extensive overlap in their offerings , when it comes to client-base, there is notably much less commonality between the two businesses.
While AllianceBernstein typically services long-only traditional funds, Societe Generale’s client base has historically focused more on the quantitative and hedge fund type firm.
Speaking to the geographical reach, Loiseau shares that during the analysis stage, the firms did not see client overlaps in the same geography with some instances demonstrating that Societe Generale did European business with one client while AllianceBernstein covered the US and Asian business already: “We didn’t see a great deal of overlap from the client perspective and weren’t really sharing clients on the same product.”
When it comes to the global footprint, geographically, the key areas of focus for expansion are Asia, The Middle East and North Africa, The TRADE understands.
Read more: AllianceBernstein becomes latest buy-side to set up shop in the Dubai International Financial Centre
“The two client bases are very complementary in terms of where we want to grow. First and foremost, it is about making sure that we cross sell to these various client bases,” concluded Loiseau.