It’s back to his roots for Kapstream Capital’s retired co-founder Kumar Palghat, as his family office takes an equity stake in a new fixed income execution fintech.
KPY Pty Ltd has made a cornerstone investment in Liquidity Cube, an ASIC-regulated fixed income execution market and analytics provider which got its Australian markets licence in December last year.
Palghat joins Kasptream portfolio manager Dan Siluk, Ardea Investment Management portfolio manager Cameron Shaw, and Stuart Plane on Liquidity Cube’s eight-strong shareholders’ register.
Liquidity Cube offers a platform for executing fixed income trades and analytical tools for liquidity matching and market flow.
The company believes it can be a viable alternative to Bloomberg terminals on trading desks.
It will use the Palghats’ investment to grow its business development team, consolidate current offering, onboard bank and buy-side investors expand current capabilities.
Liquidity Cube and Palghat’s relationship goes back more than 15 years, where the fintech’s founders built Kasptream’s systems in its initial days when Challenger had a stake in the business.
Palghat will also act as a consultant to Liquidity Cube.
“Fixed income markets are all over the counter – you have to call a broker and pricing is hard in normal times. They are trying to make fixed income trading more transparent. I think it is an industry that needs to be disrupted,” Palghat told Financial Standard.
“The idea is if somebody like Kapstream wants to sell a bond, they will have to call sell-side…What this is trying to do is to say, if Kapstream wants to sell a bond, why can’t AustralianSuper or another fixed income manager like PIMCO also buy it.”
Kumar Palghat retired from Kapstream Capital last year and has since turned his focus to investing his family’s money via his investment company KP4 Pty Ltd.
Liquidity Cube co-founder and chief operating officer Simon Burges said: “The notional value of the global OTC market is heading towards US $1,000 trillion and participants are demanding greater transparency and more alternatives to generate returns”
“Kumar has been a key participant in fixed income markets for over 30 years. The KP4 investment reflects the belief that Liquidity Cube will thrive as these markets migrate towards more sophisticated platforms for trade execution and analytics.
“In his dual role as an investor and consultant, Kumar brings a wealth of knowledge to Liquidity Cube and we are delighted to have him join us as we grow our electronic execution, analytics, valuation and data offering,” Burges said.
Liquidity Cube currently has about 25 clients (including six fund managers) and seven staff, with plans to add two back-end developers, two web-front-end staff and a junior product role.
Burges says the business has seen about $30 billion in total execution volumes since its December start.
It currently derives its revenue by charging fund managers and banks for successfully executed trades but has plans to explore two other streams: providing pricing data and valuations.
“A lot of incumbents are desktop-based with late 90s technology. Our users can execute via an internet browser, through price sheets issued by banks, via a request for quote or by putting an order in the market.”
BY: KANIKA SOOD
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