Alessandra Tocco arrived at J.P. Morgan via its acquisition of her prior employer, Bear Stearns, in 2008. J.P. Morgan is the world’s second largest custodian with $22 trillion of assets, and Tocco views capital introductions as an extension of J.P. Morgan’s broader banking relationships, including a huge network of ties to leading institutional investors worldwide. The global reach of J.P. Morgan’s exposure marked an advance on Bear’s mainly US focus.
Tocco has been working with hedge funds globally ever since she left university. She had always been interested in finance, and reflects that “it was fortunate to start out in a managed futures manager monitoring position as my first job after studying finance at university. This was an exciting time for macro and CTAs as firms such as Tudor and Moore had recently launched,” Tocco enthuses.
Tocco spent a total of 16 years at Morgan Stanley and recalls how the due diligence (DD) work “enhanced my skill sets in analysis, writing and communicating.” After being immersed in DD, Tocco determined that acquiring some sales experience would assist her career progression. Morgan Stanley’s move into Investor Client Services offered the perfect opportunity to make a sideways move, which later led to a cap intro role at ABN Amro and a third one at Bear Stearns.
Diverse team – and manager list
The breadth of Tocco’s own career is mirrored in J.P. Morgan’s cap intro team. It has several former investors “who understand strategy and structure and have good relationships with other investors.” The team also contains salespeople and those drawn from other parts of corporate life. The gender split is roughly 50% men and women, with the Americas team headed up by Kenny King, EMEA headed by Melissa Carnathan, and Asia is headed by Stephen Kelly. The fact that women are well represented may be partly due to J.P. Morgan initiatives including Women’s Initiative, the Diversity Initiative and Educational Initiatives.
Diversity is also seen in the hedge fund client base. Historically Tocco had specialized in macro, managed futures and fixed income but today she has oversight of all hedge fund strategies and asserts that “J.P. Morgan has the most diverse book on the street so investors view us as a one-stop shop from an ideas perspective.” Bear Stearns bestowed a roster of fixed income, credit, mortgage and asset-backed managers, while J.P. Morgan’s relative resilience in 2008 helped to bolster its status and bring in managers from across the strategy spectrum – activists, event driven, long short equity, credit, macro, fixed-income relative value, quant and more.
Liquidity terms of J.P. Morgan’s managers range from activists and credit funds with multi-year lock ups all the way to daily dealing funds. Liquid alternatives is a dynamic space with new product launches daily, Tocco thinks. But distribution is crucial for liquid alternatives, and Tocco points out that some launches have had to shut after they failed to gain a critical mass of assets. She thinks that rather than going it alone managers should consider well-established platforms to host their liquid alternatives offerings.
As well as breadth of coverage, Tocco highlights defining differentiators for J.P. Morgan’s capital introductions offering. It accesses a wide investor base including many large family offices, endowments, foundations and pension plans, and one of the biggest private banks in the world in the hedge fund space.
The cap intro team has shown more longevity than many – the team having stayed almost entirely the same over the last decade. Some firms seem to be a revolving door training up youngsters for marketing roles at client hedge funds – that’s not the case at J.P. Morgan. Tocco attributes the loyalty of staff to the collegial work environment “which fosters close working with partners in other divisions including sales, equity capital markets and the private bank.” Some staff even take advantage of opportunities to move amongst these divisions and this internal mobility is seen as an advantage of the global firm. The career path of one team member started in capital markets in New York, progressed to capital markets in Singapore, and then hopped over to cap intro in Hong Kong.
This holistic perspective also informs J.P. Morgan’s approach to early stage funds. “We don’t do every start-up but we do have a premium partnership with the start-ups we take a bet on,” says Tocco. Typically 40 new funds per year are signed up and the partnership model permeates throughout J.P. Morgan so that all divisions, including prime brokerage, markets and the private bank, know that the client is valued. The average day-one fund at J.P. Morgan has $200 million of assets, with the range starting at $50-100 million, while some, such as the Lion Point spin out from Elliot, have as much $1 billion. J.P. Morgan is in touch with seed-capital providers and knows what seed deals look like, so can advise funds on the terms of different deals, but does not specifically orchestrate seed-funding deals.
Thought Leadership events and publications are one distinction that Tocco is particularly proud of – not least because she formed the concept in 2008 when she arrived at J.P. Morgan after it acquired Bear Stearns, and she is the architect of the content. J.P. Morgan’s Thought Leadership events are now into their sixth year and Tocco says “we get the biggest and brightest minds and target only principals of hedge funds who want to talk about what they are doing.” For instance Chris Hohn of The Children’s Investment Fund (TCI) and Sir Michael Hintze of CQS sat on panels at the European Thought Leadership event held in June in London and John Paulson is a regular fixture at US events. Clients appreciate that the events are distinguished by top quality panels talking about themes. Nonetheless, Tocco is not resting on her laurels – “we are always looking to jazz up the thought leadership events,” she says.
One example of Thought Leadership publications is the monthly J.P. Morgan Prime Brokerage Global Hedge Fund Trends. This provides allocators and fund managers with a wealth of valuable market intelligence, answering questions such as: How are different hedge fund strategies performing and which markets and stocks are driving the numbers? How much leverage are various hedge fund strategies using? Which long and short sectors and stocks are the most overcrowded – and where is it hardest to obtain security borrow? Which types of strategies and managers are being prioritized by institutional investors in different geographies? Other content provided is also appreciated.
“Pieces on insurance companies, co-investment opportunities and pensions were very well received recently,” Tocco mentions. The audience for this research goes well beyond hedge fund investors.
These sorts of relationships are leveraged by the cap intro team. J.P. Morgan provides banking, custody and treasury services for sovereign wealth funds and Tocco says “the bank has great relationships with sovereigns, so we piggy back on that.” J.P. Morgan is doing capital introductions in 25 carefully selected countries; Tocco insists on a policy and procedures manual that includes country-specific legal and compliance work, something particularly relevant to Europe.
Where are hedge funds raising assets now? After AIFMD, some US funds are reticent about raising assets in Europe, and J.P. Morgan is happy to pass on the legal advice it receives, without giving formal legal advice. Tocco sees US managers pursuing different marketing strategies that will sometimes be tailored to individual countries. So funds may feel comfortable marketing in the UK or Switzerland, but make use of reverse solicitation or registration in France or Italy. She surmises “we don’t think anyone is throwing Europe out altogether but some segments are more difficult than others.” Tocco has observed some managers paying more attention to Middle Eastern markets, and Asian markets including Japan, Hong Kong and Korea. Notwithstanding its ongoing liberalization of capital markets, mainland China is a market that Tocco has so far only seen being exploited by giants such as Och Ziff and Citadel, but she does think asset raising there will get easier over time.
Tocco wryly reflects that J.P. Morgan’s cap intro team tends to get the most investor requests for “whatever performed best last year.” In 2015 macro is interesting and Tocco views CTAs as a smaller subset of that. Equity long short, however, is always in demand and event driven continues to attract interest. More opportunistic investors are drilling into more niche strategies such as distressed energy and co-investment opportunities. And although credit did not have a great 2014, Tocco counted 175 investors attending a credit event, as they want to learn more about it.
Yet Tocco admits it appears harder for women PMs to raise assets due in part to the need for support from mentors and bosses, and this, along with career breaks, may explain why the percentage of women on the portfolio management side remains much lower than it is in other functions such as cap intro, marketing sales, operations, legal and accounting. But longer-term, Tocco is confident that “in the next generation of hedge fund portfolio managers you will see many more women.”
Alessandra Tocco was selected as one of The Hedge Fund Journal’s 50 Leading Women In Hedge Funds 2015.
Received a B.S. in Finance from Mercy College.
Managing Director, Global Head of the Capital Introduction Group, J.P. Morgan
• Senior Managing Director, Bear Stearns
• Director, ABN AMRO
• Vice President, Morgan Stanley
At J.P. Morgan, Alessandra has been a driver behind the effort to develop thought leadership content to inform clients and institutional investors on hedge fund industry trends and business initiatives. Additionally, she is responsible for the J.P. Morgan Investor Services women’s initiative committee which focuses on enhancing and executing maternity leave planning and work/life balance for employees.