Merlin Securities

Merlin Securities

THIS is the first time Merlin Securities has secured a rating in the survey. To describe this debut as impressive would be an understatement. "The best I have used," writes one client. "No apparent weaknesses." In every service area bar two, the weighted average scores are equivalent to "very good."

The truly outstanding areas are familiar from a year ago: client service and the linked areas of reporting and technology. Commitment to client service comes naturally at a firm that is still less than three years old and pervaded by the entrepreneurial spirit of its enthusiastic and experienced founders. Clients see this cuts both ways ("Small size of firm and short operating history" are raised as concerns by one), but all clearly like what they have seen so far.

Merlin has already attracted over one hundred clients, the vast majority of them at the smaller end of the spectrum. A significant minority are start-ups. It is a focus that helps at a time when larger firms are shedding smaller funds as clients, but the firm has $500 million plus clients, and its SHARP "prime of primes" service is used by even larger funds.

Whatever their size, the fact Merlin has the highest weighted average score for client service of any provider in the survey speaks for itself. "A very high level of personalized service," writes one client. Another respondent argues that the "timely and dynamic reporting capabilities ... are probably the best in the industry."

Merlin has indeed capitalized on its lack of technological legacy to build an impressive portfolio reporting system. In fact, the firm regards its ability to equip hedge fund managers and their investors with real-time valuations of cash and non-cash instruments, plus detailed performance measurement and attribution reports, as its main competitive differentiator.

So it can be pleased that, asked to name the strengths of the firm, clients almost invariably list some combination of reporting and technology and client service. The weighted average scores in these areas are uniformly strong. Even an apparent weakness of the firm-capital introductions, mentioned in several of the comments-reflects the preference at Merlin for working with fee-based capital-raising agents, rather than running conventional capital introduction programs. The rate of non-response in this area was high.

In securities lending, where Merlin missed Best in Class awards in a couple of categories, rates of response were also low on some questions. The firm, in fact, works exclusively with Bear Stearns, whose own securities lending service topped the survey. It is one of a variety of services-financing, clearing and research are the others-provided by Bear Stearns, to which Merlin acts as introducing broker.