BNPP’s Global Markets is especially strong in equities, investment grade credit and foreign exchange and has hired a new global head of sales to holistically market the offering.

Growth in fund services has not been as spectacular as prime brokerage, since the division is selective in choosing clients, acquisitions and alliances that form the best fit. Nonetheless it is the fifth largest custodian globally and there are increasing synergies with other parts of the business.

Expanding equity research East and West

BNP Paribas Exane’s equity coverage is already extensive in Europe and moving towards a global purview: “Our legacy coverage is serial award-winning research on 700 stocks in developed Europe. This may be the widest in the market ignoring small caps, which we do not cover. There is some mid-cap coverage mainly in Continental Europe,” explains Dina Geha, Global Head of Distribution, who featured in The Hedge Fund Journal’s 2024 50 Leading Women in Hedge Funds report published in association with EY.

The team is growing in the US with sales hires on the West Coast and in Boston. Some 300 US names in technology, consumer, industrials and energy have been added, while in-house Asian equity research is growing from an original base of roughly 65 stocks. “Over the next few years we expect to be covering 250 APAC stocks in-house, having hitherto used Morningstar. This has taken time because we wanted to ensure consistent quality. Meanwhile a joint venture with a Turkish bank, TEB Yatirim, is also being brought in-house with research on the ground in Turkey,” says Geha.

Historically, the research style was purely fundamental but is now diversifying into some “quantamental” style research. Additionally, three event driven specialists have been hired from Credit Suisse; this sleeve sits in Global Markets rather than research.

BNP Paribas Exane has always been distinguished by the seniority and tenure of its research analysts. They are renowned for traditional long term fundamental deep dive sector research but also bridge the gap to trading with some shorter term and more tactical catalyst-driven research.

Sell-side research is perceived to have a bullish bias but in BNPP’s global coverage of 1,060 stocks 17.0% of ratings are “Underperform”. Though the equity research does not cover security borrow, the prime brokerage can apprise clients of it.

Events and corporate access

BNP Paribas runs sought-after events for research and corporate access. The flagship event is a CEO generalist conference in June while a mid-cap conference is held in November; both events are in Paris. The three-day CEO conference has been running for 30 years. “At least 100 companies attend and send their CEOs or sometimes CFOs to speak. Over 1,000 investors attend, participating in both plenary sessions and small group meetings,” says Geha.

An energy transition event focused on global electric vehicles and mobility was launched two years ago in Hong Kong and two new sector specialist conferences go live in 2025: a global TMT event will start in London along with TIME – Industrials, Materials and Energy. Additionally, there are numerous other industry conferences, seminars, field trips and investor days. “We want to complement the strength of long-term bottom-up industry research with differentiated corporate access. We have and intend to invest more as we grow our global research coverage,” says Theepan Jothilingam, Head of EMEA Equity Research.

Quantitative funds have not shown interest in meeting CEOs but are starting to request corporate access data to help gauge which CEOs are most oversubscribed.

Execution

Equity execution coverage is global, including high touch voice and electronic execution, where the integration of Deutsche Bank’s prime brokerage has complemented and augmented Exane’s existing algorithmic prowess. BNPP algos for developed Europe have been ranked as top in multiple categories year after year by The Trade and are valued for customization. Now this is being offered globally.

Prime brokerage: cash and synthetic

BNPP’s financing balances, including synthetic and physical, are now roughly four times greater than before the Deutsche Bank and Credit Suisse deals (according to internal management information). Deutsche Bank’s prime brokerage was acquired in 2019 and was fully integrated by 2021. The closure of Credit Suisse’s prime brokerage also led to a referral agreement and garnered rainmakers. “Before the deals we had a very US-focused cash prime brokerage business. DB has brought Asian and European cash capabilities as well as a global synthetic presence,” says Ashley Wilson, Head of Prime Brokerage.

Coalition data now ranks BNPP as 6th globally. “This is quite accurate for Prime Services as a whole (which includes Delta One trading) though there are different opinions about synthetic prime brokerage and other ranking criteria might make us 7th,” admits Wilson.

BNPP is ranked as first or second in Europe for Delta One financing such as trading equity indices and for clearing on European exchanges, though the latter is not included in the prime brokerage business metrics in BNPP’s structure, where clients can also opt to use another clearer.

There is however significant overlap amongst prime brokerage, clearing and FX relationships. “Some clients do one, two or three of them and our leadership forum is focused on cross selling and holistically servicing clients.

Security lending

Inventory management and security lending are also strong offerings. BNPP takes pride in managing complex financing, reporting and service levels and sourcing and pricing stock loan, where availability is improving: “In China 18 months ago we had limited availability, but now have top tier stock loan capabilities,” says Wilson.

Shorting in the Gulf

In the Middle East BNPP has become expert in the niceties and nuances of short selling in various markets such as Abu Dhabi, Dubai, Qatar and Turkey. “There are complicated rules and restrictions, and we are very careful to invest in technology to manage them,” says Wilson.

Margin and cross margining

BNPP works with all the giant multi-strategy pod shops. BNPP can offer cross margining offsets and relief across the whole prime brokerage business, covering credit, futures, options and equities. “Our cross-margining methodology is especially helpful in credit prime brokerage for corporate bond financing and systematic long/short credit strategies. And the PBX Plus cross asset financing and margining product is being rolled out,” says Wilson.

The exact margin rates vary with brokers’ methodologies and algorithms. “We are competitive and can handle complex financing trades but do not try to win business by offering the lowest margin rates on the street. Relative value trades charge lower margin than directional trades but we would not offer 100 times leverage for fixed income basis trades between cash bonds and futures. Our margin methodologies are calibrated to protect the bank, and we salvaged some capital from the Archegos episode,” says Wilson.

Selective cap intro and emerging managers

BNPP has big capital introduction teams in all regions. For the BNP Paribas 2025 outlook, the BNP Paribas’ Capital Introduction Group surveyed 229 allocators in December 2024 and January 2025 who invest or advise on $1.4 trillion in hedge fund assets, approximately a third of industry assets under management. Key findings included that growing alpha generation is inspiring investors to increase allocations to both fundamental and quantitative strategies, increasingly using managed accounts.

BNPP’s cap intro teams have helped some managers grow from zero to ten or fifteen billion dollars or more of assets. “Realistically, cap intro cannot be offered to everyone because it is a finite resource. We prioritize taking a bet on funds and forming a strategic partnership with them,” says Wilson.

BNPP has some appetite for smaller and newer funds through its emerging manager program, which wagers on ten to fifteen managers per year. Bobby Jain’s huge 2024 launch, Jain Global, is one recent example.

Wilson is quite candid in admitting that the dearth of a US equity IPO pipeline does handicap BNPP against the bulge bracket US banks in vying for some pure equity long/short business. BNPP does however provide new issues of corporate bonds and especially convertibles where they can offer an attractive package including equity hedges and margin.

Global markets connectivity

“We were always strong in both primary and secondary credit markets as the largest European corporate banker. We have the balance sheet and primary issuance calendar, and it is easy to build secondary credit on top of that, though the bank’s risk appetite and balance sheet budgeting means there is less in leveraged finance. Our competitive financing helps to make us very big in financing asset-backed and mortgage-backed securities, but the US firms dominate flow trading in these areas,” explains the new Global Head of Institutional Sales, Conor Davis. He held the same role at Citi having pivoted into sales after starting in high yield and distressed trading. He cross sells the whole platform across BNPP and leads nearly 1,000 salespeople globally. “The Markets business has moved from a product-aligned model to a much more client-centric one,” explains Davis.

Twelve weeks into the job, Davis has already visited multiple offices in Asia, Europe and the US. He sets his own travel calendar and decided on Tokyo, Hong Kong, Middle East, Paris, Miami and New York when we spoke in December 2024. “I was blown away by the global connectivity, which is stronger than I had realized. We work with the US giants and with local hedge funds in Asia. In the US Miami is growing and there is also a presence in Chicago and on the West Coast,” he enthuses.

BNPP arrived at the party late but has more than made up for lost time. “We are celebrating 10 years of global markets while others have been doing it for 100 years. But we have already overtaken my old shop Citi on prime broker balances by a large margin as Deutsche’s equity expertise was the perfect complement for our credit franchise. Some prime brokers are strong in either equities or credit, but we excel in both,” declares Davis.

BNPP serves a wide range of financial institutions, but hedge funds are key for equities as the largest part of prime broker balances. “There are co-dependencies in equities between prime brokerage, cash and Delta One derivatives,” explains Davis. In contrast, some other sorts of asset managers can be a larger share of fixed income, where BNPP’s strengths extend to quant and structured credit supported by BNPP’s own quants: “The French DNA still permeates the organisation in terms of really smart engineers,” says Davis.

Commodities are one area where BNPP does not try to offer the widest range of markets, since ESG policies somewhat constrain its coverage. Since most clients have at least two or three prime brokers they can plug any gaps elsewhere.

BNPP is sought after by hedge funds that want to diversify away from the big five US banks. “We aim to be the number one European or non-US bank and grow our share of wallet, which is 5.5% today according to Coalition Greenwich data,” says Davis.

Fund services: a discerning growth strategy

BNP Paribas’ Securities Services business works with all sorts of alternative funds from liquid UCITS hedge funds to private capital and even some hybrid multi-strategy vehicles. The global custodian is the only European player among the world’s top 5 by assets under custody, and within the top 3 depositary banks in Europe with a broad reach.

The acquisition to integrate HSBC’s hedge fund administration business was not just about scale. “We do not try to win everything but build the right selective partnerships that are interesting for clients and ourselves to build wide and relevant relationships. Some customers may use us across global markets – for execution and prime brokerage – and Securities Services businesses for administration and custody,” says Diarmuid Ryan, Global Head of Alternatives, Liquid Alternatives & Hedge Fund Services at BNP Paribas Securities Services. The onboarding process of current HSBC clients to BNP Paribas is on track to conclude in Q1 2025.

BNP Paribas’ Securities Services business has raised its game in the alternatives area over the past 10 years becoming more ambitious with the 2015 Credit Suisse acquisition bringing senior teams who are still with the firm. “We do not chase everything and have rejected many proposed deals. We are laser focused on alternatives across the board,” says Ryan. “We could have easily tripled our growth rate, but we decline more business than we accept. The roster of clients has been transformed since 2015 or even 2019. The number of clients on the Securities Services side has roughly doubled but the quality of the client base has evolved more significantly. Europe has been the natural engine of growth, but we are also accelerating across the Americas and APAC,” he points out.

Flexible bundling

Not all prime brokerage clients are the best fit for fund services. “Some clients want the full package, and others opt for an a la carte menu. Some clients need Securities Services’ fund administration, custody and depositary bank services but do not need those of Global Markets. Others use Global Markets’ execution services without prime brokerage. A typical bundle is fund administration, cash, custody, depositary bank and FX services – though there are always exceptions. There is a growing overlap between prime brokerage and fund services clients, but no requirement to bundle them. Other integrated banks make it almost a requirement to take all services together,” explains Ryan.

Most clients use at least two BNP Paribas business lines, which enhances efficiency and creates a bigger and more valuable relationship. “Some 70% of new relationships favour bundled services and 90% of Securities Services’ clients use complementary services in addition to administration, such as cash management, custody, depositary or FX,” says Ryan. While some firms follow a more modular approach, nearly 100% of a client’s administration, custody and depositary can be outsourced. There is, however, more variation in selected front, middle and back-office operations. “Some clients mix and match internal and external combinations for different functions, such as currency management, hedging, cash management, collateral management, margin calculation and OTC valuations, which can all be outsourced to some degree,” points out Ryan. “Middle office outsourcing has been the catch-up trend, though 30-40% of firms still keep it in-house,” he says.

Open architecture for vendors

The architecture is open and connected to at least 60 front end and counterparty connections with vendors. “We serve multiple client segments who have their own partnerships. We have a range of middle-office solutions and are agnostic on front-end connections. In all these cases, we offer both fund accounting and transfer agency, as well as middle office services,” says Ryan.

Automation and AI brainstorming

Around 99% of transactions are STP (straight-through processing) as standard while trade capture and pricing are becoming automated; Cap Link, BNP Paribas’ digital platform for alternative fund managers and investors, is automating functions, such as digitalised reporting, ESG insights and data analytics, for investors and clients. AI could reduce paperwork on loan documentation.

AI is becoming more integrated into various bank solutions. “We are brainstorming solutions and refreshing all of the time for new ideas, trends and providers,” adds Ryan.

A human touch

Nonetheless, real humans talk to clients to resolve problems. “Client service is situated in the same time zones as clients and we really invest in client service, relationship managers and operational managers, with big hubs in the UK, Ireland, Hong Kong, Singapore and the US. There is still a global operating model with key centres including Portugal, Poland and India. I really enjoy visiting all the teams globally to stay close to the heartbeat of ideas on the ground where things really happen,” says Ryan.

Ryan remains focused on alternatives and hedge funds, and relishes client events where customers can learn more about different parts of the bank. “We have made the right client decisions, and we remain ambitious but selective on how to grow,” he says.