Tourmaline Partners, which provides trading solutions to buy-side clients on an outsourced basis, has secured a majority investment from private equity firm Copley Equity Partners. The company will use the funds – terms weren’t disclosed – to finance its geographical expansion from bases in Stamford, Conn., London and Sydney, to expand its asset class coverage and to add new proprietary technologies, according to CEO Aaron Hantman.
Tourmaline sought outside funding for its growth plans after its five founding executives realized its plans required a higher level of financial support than they themselves could deliver, Hantman says.
The investment is Copley’s first foray into capital markets. The private equity firm is focused on financing established SME corporations with high growth prospects and EBDITDA of $1-$10 million. With investments ranging from medical waste to a Dunkin Donuts franchise, the firm appears to prefer to take on relatively few investment projects but dedicate a lot of attention to each.
According to its website: “As owners, Copley devotes substantial time and resources towards business development initiatives, including recruiting executive/board of director talent, salesforce development, identifying and executing acquisitions, and succession/exit planning.”
Copley’s independence from financial services entanglements sits well with Tourmaline’s business model. Tourmaline provides trading services – with assigned human traders using state-of-the-art technology tools – for some 300 buy-side clients, ranging from small hedge funds to giant asset managers. Through direct connections and via market dark pools and other electronic trading venues, Tourmaline exposes client orders to some 400 global brokers.
Tourmaline’s own independence is key to providing unbiased access to these sources of liquidity. “Since Copley Equity is a private family office with no brokerage-related services of its own, or investments in any brokerage firms,” Hantman says, “Tourmaline can continue to grow while remaining 100% conflict-free with the broad range of sell-side firms we trade with.
Founded in 2011, Tourmaline is one of several providers in the so-called outsourced trading desk space, which has seen the emergence of players like BTON Financial and Coremont in recent years. The company was launched by a group of former trading executives, including several from Greenwich Prime Trading, itself a pioneer of outsourced trading. Hantman is a former CEO of Susquehanna Financial Group, part of Susquehanna International Group (SIG).
“We have always focused on the buy-side trading experience,” says Hantman. It does this by assigning each buy-side client an individual human trader – Tourmaline employs 35 – who manages the customer relationship assisted by the usual trading desk tools for helping identify sources of liquidity and defining, measuring and achieving best execution.
Hantman says the Tourmaline offering allows buy-side clients of all sizes to enjoy modern market access and analytics without the need for major upfront investment.
According to Peter Trovato, managing partner at Copley, “changes across the trading landscape – from MiFID II-driven unbundling, to liquidity fragmentation and cost pressures – have led the buy side to seek outsourced and supplemental trading solutions to gain efficiencies and improve trading performance.”