The start-up founded by two former Morgan Stanley executives is expanding into separately managed accounts (SMAs) in the US.
The new business line is set to be launched soon to serve as a third-party provider of structured products SMAs for registered investment advisors (RIAs) in the US, according to a senior source at the company.
It will be operated under Arrow Investment Management LLC that was incorporated in Delaware in mid-October, a company filing shows. Based in New York, the business will be led by Larry Wilson (pictured) and Dave Walsh who were most recently senior sales executives for structured products at Morgan Stanley.
“The offering is targeted at investment advisory firms that prefer to wrap structured products into an SMA, which is advised and managed by a team of professionals instead of having bespoke structured products being held by clients,” said the source.
The launch will be an expansion from the firm’s analytics service provided under Arrow Investment Analytics LLC (Arrow IA), which also targets RIAs and was incorporated in Delaware last April.
The combined business currently employs 10 staff across the US and the UK.
By distribution, the RIA segment has shown notable growth with SMAs being increasingly used. It accounts for approximately 15% of the American structured notes market after wire houses and independent broker-dealers, an increase from five percent less than a decade ago, according to two other market sources.
With a focus on the pre-trade, the analytics business aims to enable RIAs to “make informed decisions” by evaluating a structured product’s risk and reward metrics.
While existing peers tend to specialise in term sheets generation, back-testing and scenario analysis, Arrow IA is keen to “provide a level playing field where advisors can get much more detailed analysis than what they get from any issuer,” said the source.
Post-trade services are also made available, such as life cycle management.
The company sees opportunities to work with transactional platforms specialising in structured products in the US as a “plug-in” on the analytics side.
Arrow IA has contributed to Raymond James Financial’s record structured products growth – the advisory firm closed its FY24 financial year ending September with US$5.6 billion gross sales.
The partnership brings a tailor-made analytics system for pricing and a range of metrics, including the probability of gain and loss and tail risks.
“Advisors are coming and asking Raymond James’ origination team to go to the market to source pricing, get the best deals and execute the deals on their behalf,” said the source.
“The analytics Arrow IA provides is an added value the team wants to be giving to their advisory networks.”