Tags: Prime Brokerage Software, Prime Brokers Software, Software for Prime Brokers, Top Prime Brokerage Software Platform, Prime Brokerage Software Solutions, Prime Brokers, Prime Brokerage
Late last year JPMorgan was the recipient of $25 billion in bailout loans through the government’s Troubled Asset Relief Program. But today is a different story, as JPMorgan performed well beyond analysts’ expectations with an impressive second quarter. The second quarter earnings increased by 36% over the first quarter of this year to $2.7 billion. With that performance, JPMorgan has joined Goldman Sachs as a top investment bank that went from bailout to produce huge earnings.
Goldman Sachs, which also received government help, emerged from the pile by earning $3.44 billion in the second quarter. Both firms are now set to be the top firms on Wall Street. The high earnings in comparison to the other investment banks, which have struggled to overcome the damage of the global financial crisis, allows them to outspend their competition. They can now use the profits to buy top talent from the other investment banks and further accumulate profits by charging clients higher fees along with other advantages that come from being the biggest on the Street.
Robert Reich, a Professor of Public Policy at UC Berkley is critical of the top-performing firms and sees a greater role for the government in overseeing the powerful banks. He believes that antitrust enforcers should be charging the banks a hefty insurace fee in exchange for marking them “too big to fail” giving them the assurance that they will be bailed out if risky choices don’t pan out. Professor Reich argues that even though both banks have repaid their federal loans the governement should not allow the banks to influence the debate over financial regulations–especially in regards to derivatives trading. He prescribes the following:
Antitrust law was designed to prevent just this sort of market power and political heft. The Justice Department or the Federal Trade Commission should investigate the new-found dominance of Goldman and JP — and, if warranted, break them up. Alternatively, Congress should impose a surtax on the newly-exclusive group of Wall Street firms, most notably Goldman and JPMorgan, which are now backed by implicit government bailout insurance guaranteeing that, should they get into trouble, taxpayers will keep them afloat. The surtax would approximate the economic benefit to these firms of such government largesse, which I’d estimate to be at least 50 percent of their profits from here on.
Tags: Robert Reich JPMorgan and Goldman Sachs, Robert Reich marketplace, investment banks, prime brokerage, JPMorgan and Goldman Sachs, Goldman profits, prime brokers bailout
Late last year JPMorgan was the recipient of $25 billion in bailout loans through the government’s Troubled Asset Relief Program. But today is a different story, as JPMorgan performed well beyond analysts’ expectations with an impressive second quarter. The second quarter earnings increased by 36% over the first quarter of this year to $2.7 billion. With that performance, JPMorgan has joined Goldman Sachs as a top investment bank that went from bailout to produce huge earnings.
Goldman Sachs, which also received government help, emerged from the pile by earning $3.44 billion in the second quarter. Both firms are now set to be the top firms on Wall Street. The high earnings in comparison to the other investment banks, which have struggled to overcome the damage of the global financial crisis, allows them to outspend their competition. They can now use the profits to buy top talent from the other investment banks and further accumulate profits by charging clients higher fees along with other advantages that come from being the biggest on the Street.
Robert Reich, a Professor of Public Policy at UC Berkley is critical of the top-performing firms and sees a greater role for the government in overseeing the powerful banks. He believes that antitrust enforcers should be charging the banks a hefty insurace fee in exchange for marking them “too big to fail” giving them the assurance that they will be bailed out if risky choices don’t pan out. Professor Reich argues that even though both banks have repaid their federal loans the governement should not allow the banks to influence the debate over financial regulations–especially in regards to derivatives trading. He prescribes the following:
Antitrust law was designed to prevent just this sort of market power and political heft. The Justice Department or the Federal Trade Commission should investigate the new-found dominance of Goldman and JP — and, if warranted, break them up. Alternatively, Congress should impose a surtax on the newly-exclusive group of Wall Street firms, most notably Goldman and JPMorgan, which are now backed by implicit government bailout insurance guaranteeing that, should they get into trouble, taxpayers will keep them afloat. The surtax would approximate the economic benefit to these firms of such government largesse, which I’d estimate to be at least 50 percent of their profits from here on.
Tags: Robert Reich JPMorgan and Goldman Sachs, Robert Reich marketplace, investment banks, prime brokerage, JPMorgan and Goldman Sachs, Goldman profits
Below is are a few excerpts from a recent article by IDD on the revolution of the prime brokerage business.
Prime brokers are an attractive bet to firms like Sequoia — which made its investment through the Sequoia Capital U.S. Growth Fund, with nearly $900 million under management — because they are an integral part of a hedge fund’s business. They provide the lending, clearing and settlement services that hedge fund managers rely on. Increasingly, however, prime brokers’ stock has risen in value as they bend with the changes hedge funds are experiencing.
In some cases prime brokers are expanding their role and realigning their business models to compensate for the decline in profits tied to the smaller pools of assets that hedge funds are managing. Just this week, for example, the industry lost another $3 billion when the Pequot Capital Management hedge fund revealed that it was winding down its funds and closing its doors in response to an investigation involving insider trading.
“Prime brokers are pulling back on capital introduction, consulting and financing. There are hedge fund clients looking for solutions, things they used to turn to that are not available anymore,” says Dailey. Prime brokers have also done away with supplying shared office space to hedge funds, a common practice in which 20 to 30 hedge funds shared quarters to save on expenses; it was begun in the ’80s at Furman Selz.” Read more…
Tags: Prime Brokerage Services, prime brokerage hedge fund services, suite of prime brokerage services, expanding prime broker services, prime broker, prime brokerage
Below is are a few excerpts from a recent article by IDD on the revolution of the prime brokerage business.
Prime brokers are an attractive bet to firms like Sequoia — which made its investment through the Sequoia Capital U.S. Growth Fund, with nearly $900 million under management — because they are an integral part of a hedge fund’s business. They provide the lending, clearing and settlement services that hedge fund managers rely on. Increasingly, however, prime brokers’ stock has risen in value as they bend with the changes hedge funds are experiencing.
In some cases prime brokers are expanding their role and realigning their business models to compensate for the decline in profits tied to the smaller pools of assets that hedge funds are managing. Just this week, for example, the industry lost another $3 billion when the Pequot Capital Management hedge fund revealed that it was winding down its funds and closing its doors in response to an investigation involving insider trading.
“Prime brokers are pulling back on capital introduction, consulting and financing. There are hedge fund clients looking for solutions, things they used to turn to that are not available anymore,” says Dailey. Prime brokers have also done away with supplying shared office space to hedge funds, a common practice in which 20 to 30 hedge funds shared quarters to save on expenses; it was begun in the ’80s at Furman Selz.” Read more…
Tags: Prime Brokerage Services, prime brokerage hedge fund services, suite of prime brokerage services, expanding prime broker services, prime broker, prime brokerage
Below is a note from a recent HedgeFund.net conference about the profitability of prime brokerage. While short-term there is a downtown in volume and assets on the books of many prime brokerage firms, I believe the industry is still very profitable for dozens of firms. While some groups are suffering, many are seeing huge gains in assets over the last few quarters. Here is the article quote:
Prime brokerage is dead or, in the aftermath of the collapse of Lehman Bros., at least on life support, a panel at a HedgeFund.net conference Wednesday said.“I don’t think the prime brokerage model is dead, but it is definitely in a coma,” panelist Richard Del Bello offered. Read more…
Tags: prime brokerage, prime broker, prime brokers, prime brokerage profits, profitability of prime brokerage industry, investment banking, investment bank
Below is a note from a recent HedgeFund.net conference about the profitability of prime brokerage. While short-term there is a downtown in volume and assets on the books of many prime brokerage firms, I believe the industry is still very profitable for dozens of firms. While some groups are suffering, many are seeing huge gains in assets over the last few quarters. Here is the article quote:
Prime brokerage is dead or, in the aftermath of the collapse of Lehman Bros., at least on life support, a panel at a HedgeFund.net conference Wednesday said.“I don’t think the prime brokerage model is dead, but it is definitely in a coma,” panelist Richard Del Bello offered. Read more…
Tags: prime brokerage, prime broker, prime brokers, prime brokerage profits, profitability of prime brokerage industry, investment banking, investment bank
The following post first appeared on PrimeBrokerageGuide.com, the #1 website on prime brokerage.
Just found a great article on the prime brokerage business and what challenges they face right now. The article suggests that there are three key issues facing prime brokers right now and provides some advice on how to face those challenges. Below is a short excerpt from this article and link to the full text.
As historic flows of hedge fund redemptions draw worldwide attention, prime brokerages face stiff competition for assets under management. Accenture believes that in order to adapt to the current downturn and position for high performance when the market rebounds, prime brokerages face three key imperatives.
- Strengthen Core Business Capabilities
- Build A Client Centric Organization
- Focus on Operational Efficiency
Learn more about Prime Brokerage.
Tags: prime brokerage regulation, prime broker, prime brokerage, prime brokerage trends, news on prime brokers, hedge fund, hedge funds
The following post first appeared on PrimeBrokerageGuide.com, the #1 website on prime brokerage.
Just found a great article on the prime brokerage business and what challenges they face right now. The article suggests that there are three key issues facing prime brokers right now and provides some advice on how to face those challenges. Below is a short excerpt from this article and link to the full text.
As historic flows of hedge fund redemptions draw worldwide attention, prime brokerages face stiff competition for assets under management. Accenture believes that in order to adapt to the current downturn and position for high performance when the market rebounds, prime brokerages face three key imperatives.
- Strengthen Core Business Capabilities
- Build A Client Centric Organization
- Focus on Operational Efficiency
Learn more about Prime Brokerage.
Tags: prime brokerage regulation, prime broker, prime brokerage, prime brokerage trends, news on prime brokers, hedge fund, hedge funds
The following articles was initially published on PrimeBrokerageGuide.com. The number of stories coming out about prime brokerage hirings, acquisitions, and office moves has doubled over the past two years. This industry is going through some huge changes right now. Here is a recent article out on CitiGroup and Bank of America making changes to their platforms.
Citigroup (C) and Bank of America (BAC) are boosting their prime brokerage groups to take advantage of disruption in the business amid the financial crisis, according to published reports.Prime brokerage is the business of providing trading and lending services to hedge funds. Citi has added 18 people this year to its global prime brokerage operations, The Wall Street Journal says. BofA, through its recent acquisition of Merrill Lynch, plans to hire 40 employees for its global financing business. The 800-person group includes prime brokerage and securities lending, among other businesses, the Journal says.
Goldman Sachs (GS) and Morgan Stanley (MS) have long been the leaders in prime brokerage, the article says. But others, including Citi and BofA had been looking to expand their business for several years now. source
Learn more at http://PrimeBrokerageGuide.com
Tags: prime broker, prime brokerage, prime brokerage industry, prime brokers, prime broker acquisitions, prime brokerage statistics
The following articles was initially published on PrimeBrokerageGuide.com. The number of stories coming out about prime brokerage hirings, acquisitions, and office moves has doubled over the past two years. This industry is going through some huge changes right now. Here is a recent article out on CitiGroup and Bank of America making changes to their platforms.
Citigroup (C) and Bank of America (BAC) are boosting their prime brokerage groups to take advantage of disruption in the business amid the financial crisis, according to published reports.Prime brokerage is the business of providing trading and lending services to hedge funds. Citi has added 18 people this year to its global prime brokerage operations, The Wall Street Journal says. BofA, through its recent acquisition of Merrill Lynch, plans to hire 40 employees for its global financing business. The 800-person group includes prime brokerage and securities lending, among other businesses, the Journal says.
Goldman Sachs (GS) and Morgan Stanley (MS) have long been the leaders in prime brokerage, the article says. But others, including Citi and BofA had been looking to expand their business for several years now. source
Learn more at http://PrimeBrokerageGuide.com
Tags: prime broker, prime brokerage, prime brokerage industry, prime brokers, prime broker acquisitions, prime brokerage statistics
Here is a short article excerpt on how banks have once again begun to expand their prime brokerage operations. I personally have not heard of any hiring sprees by prime brokerage departments or mini primes over the last two months, but I do know that with a wealth of experienced prime brokerage professionals in NYC without bonuses or sometimes employment that several prime brokers are being opportunistic and bringing the best professionals they can find in house. Here is the article excerpt:
During the bleakest days of last October–November, few banks were touting their prime brokerage operations. Hedge fund liquidity dried up, banks lost appetite to lend to these institutions, and prime brokerages were backed into a corner. However, this business is making a comeback and banks are starting to rehire, as Hugh Chow reports.
A hiring drive by Barclays Capital and Bank of America Merrill Lynch is highlighting the ambitions of smaller players in the opaque world of Asian prime brokerage, an industry that seemed to be on the ropes after the collapse of Lehman Brothers late last year.
Barcap is looking for a head of prime services Asia-Pacific, after advanced negotiations with ex-UBS banker, Matt Pecot, fell through at the 11th hour last week. The firm’s prime services division includes a prime brokerage – the business of lending and providing other trading-related services to hedge funds.
Meanwhile an internal announcement on May 18 by BoA Merrill heralded the appointment of former Tremont Capital Management and Morgan Stanley man James Fallon as a director on the Asia-Pacific financing sales team. Fallon’s job will be to drive the business of lending to hedge fund clients in this region. source
Tags: Prime Brokerage, prime broker, prime brokers, Prime Brokerage Firms Hiring, Open prime brokerage positions
Here is an article I found on the recent revival of the prime brokerage industry. There have been several of these types of articles coming out over the past several weeks:
The world of prime brokerage has had a traumatic eight months. “The industry changed when Lehman went under. Hedge funds were suddenly made aware of counterparty risk, and they realised they couldn’t put all their eggs in one basket,” said Eddie Guillemette, head of international financing sales at Bank of America Merrill Lynch. The situation appears to be improving, and banks are starting to recruit again. Barclays Capital and BofA Merrill both initiated hiring drives in Asia-Pacific. source
Tags: Prime Broker, Prime Brokers, Prime Brokerage, prime brokerage industry, business of prime brokerage, trading, clearing, capital raising, capital introduction
Please see below for information on service providers within the following categories:
Tags: Hedge Fund Service Providers, Hedge Fund Service Provider Directory, prime brokerage, trading and clearing, independent investment research, family office databases
Here is a short article excerpt on how banks have once again begin to expand their prime brokerage operations. I personally have not heard of any hiring sprees by prime brokerage departments or mini primes over the last two months, but I do know that with a wealth of experienced prime brokerage professionals in NYC without bonuses or sometimes employment that sevearl prime brokers are being opportunistic and bringing the best professionals they can find in house. Here is the article excerpt:
During the bleakest days of last October–November, few banks were touting their prime brokerage operations. Hedge fund liquidity dried up, banks lost appetite to lend to these institutions, and prime brokerages were backed into a corner. However, this business is making a comeback and banks are starting to rehire, as Hugh Chow reports.
A hiring drive by Barclays Capital and Bank of America Merrill Lynch is highlighting the ambitions of smaller players in the opaque world of Asian prime brokerage, an industry that seemed to be on the ropes after the collapse of Lehman Brothers late last year.
Barcap is looking for a head of prime services Asia-Pacific, after advanced negotiations with ex-UBS banker, Matt Pecot, fell through at the 11th hour last week. The firm’s prime services division includes a prime brokerage – the business of lending and providing other trading-related services to hedge funds.
Meanwhile an internal announcement on May 18 by BoA Merrill heralded the appointment of former Tremont Capital Management and Morgan Stanley man James Fallon as a director on the Asia-Pacific financing sales team. Fallon’s job will be to drive the business of lending to hedge fund clients in this region. source
This article was first published on Prime Brokerage Guide.com.
Tags: Prime Brokerage, prime broker, prime brokers, Prime Brokerage Firms Hiring, Open prime brokerage positions
Here is a short article excerpt on how banks have once again begin to expand their prime brokerage operations. I personally have not heard of any hiring sprees by prime brokerage departments or mini primes over the last two months, but I do know that with a wealth of experienced prime brokerage professionals in NYC without bonuses or sometimes employment that sevearl prime brokers are being opportunistic and bringing the best professionals they can find in house. Here is the article excerpt:
During the bleakest days of last October–November, few banks were touting their prime brokerage operations. Hedge fund liquidity dried up, banks lost appetite to lend to these institutions, and prime brokerages were backed into a corner. However, this business is making a comeback and banks are starting to rehire, as Hugh Chow reports.
A hiring drive by Barclays Capital and Bank of America Merrill Lynch is highlighting the ambitions of smaller players in the opaque world of Asian prime brokerage, an industry that seemed to be on the ropes after the collapse of Lehman Brothers late last year.
Barcap is looking for a head of prime services Asia-Pacific, after advanced negotiations with ex-UBS banker, Matt Pecot, fell through at the 11th hour last week. The firm’s prime services division includes a prime brokerage – the business of lending and providing other trading-related services to hedge funds.
Meanwhile an internal announcement on May 18 by BoA Merrill heralded the appointment of former Tremont Capital Management and Morgan Stanley man James Fallon as a director on the Asia-Pacific financing sales team. Fallon’s job will be to drive the business of lending to hedge fund clients in this region. source
This article was first published on Prime Brokerage Guide.com.
Tags: Prime Brokerage, prime broker, prime brokers, Prime Brokerage Firms Hiring, Open prime brokerage positions
Below please find a short profile created based on publicly available notes, articles and press releases on JP Morgan’s prime brokerage business:
Resource #1: J.P. Morgan’s rescue of Bear Stearns has likely dampened its interest in bidding for the prime-brokerage unit that is being offered by Bank of America.
One of the jewels that comes with J.P. Morgan’s government-assisted acquisition is Bear’s profitable prime-brokerage unit, which recently ranked in the top three in that business – along with Goldman Sachs and Morgan Stanley. Bear’s franchise was tarnished in recent weeks as many of its clients fled, making it hard to determine how much of the business remains.
In January, BofA responded to credit-crunch losses by scaling back its investment banking business and putting its prime-brokerage operation on the auction block. J.P. Morgan has been rumored to be among the leading suitors of that unit, along with Barclays, BNP Paribas and, to a lesser extent, Royal Bank of Scotland and Jefferies Group.
Integrating Bear’s prime-brokerage business into the small fixed-income and derivatives brokerage operation that J.P. Morgan has operated since 2003 looms as a daunting task for the bank – one that would make it extremely difficult to simultaneously merge BofA’s operation.
Also, it’s likely that many of the hedge funds that clear their trades and borrow from BofA have also done so at Bear. There might be enough overlap of clients to make such an acquisition less valuable to J.P. Morgan. source
Resource #2 (4.20.09) JPMorgan Chase & Co. became the third major U.S. bank after Goldman Sachs and Wells Fargo to post profits for its first quarter, beating analyst estimates and sending its stock price rising to over $33 in late trading at the New York Stock Exchange (NYSE).
The company reported profits of $2.14 billion, or 40 cents a share, down 10 percent from over a year ago. Its revenue jumped to $26.9 billion, almost 50 percent over the year earlier. Its profit was still higher than analyst estimates, and its market cap has close to doubled over the last month based on expected strong showing from the bank.
The rise in earnings was mostly from strong performance from its investment banking division, which posted earnings of $3.6 billion compared to a loss last year. The investment banking division was primarily driven by JPMorgan’s prime brokerage business, which the bank acquired in its fire-sale acquisition of failing investment firm Bear Stearns last year.
“Bear Stearns equity [trading] business was very strong,” JPMorgan CEO Jamie Dimon said during a conference call Thursday as quoted by the Wall Street Journal. source
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Tags: JP Morgan, (JPM), JP Morgan Prime Brokerage Services, Prime Brokerage, Prime Broker
Just saw this note below related to JP Morgan’s prime brokerage arm:
The rise in earnings was mostly from strong performance from its investment banking division, which posted earnings of $3.6 billion compared to a loss last year. The investment banking division was primarily driven by JPMorgan’s prime brokerage business, which the bank acquired in its fire-sale acquisition of failing investment firm Bear Stearns last year.“Bear Stearns equity [trading] business was very strong,” JPMorgan CEO Jamie Dimon said during a conference call Thursday as quoted by the Wall Street Journal. source
For more information on prime brokerage please see PrimeBrokerageGuide.com
Tags: JP Morgan Prime Brokerage, JP Morgan, (JPM), Prime Brokerage, Hedge Fund Prime Brokerage
Lower trading volumes have hurt many prime brokers. It has a led to a loss in talent to competitors and lower overall profits for 2008 and 2009. Below is a story about an Asian based prime brokerage firm shutting down. The article does not mention it but I believe part of this was the result of having a few of their relationship development managers cherry picked by larger prime brokerage firms:
The contraction of the Asian hedge fund industry is being felt by the region’s service providers. Prime broker Pali Holdings is closing its only office in Asia as its customers have cut back on their trading. source
Tags: Asian Prime Brokerage, Prime Brokerage Closing Down, Prime Brokerage Firms shutting down, prime broker, prime brokers, prime brokerage, trading, hedge fund trading, prime brokerage Firm
Below please find news stories and articles on various prime brokerage industry firms.
Tags: Prime Brokerage Firms, Prime Broker Companies, prime broker company, prime brokerage firm, Prime broker, prime brokerage, investment bank prime brokerage, hedge fund prime broker
PrimeBrokerageGuide.com is the only website focused on providing educational content focused exclusively on the topic of prime brokerage. The website was started in early 2008 and now contains hundreds of industry articles and resources. Below please find a list of the top 20 most popular articles now posted to this niche website:
Tags: Prime Brokerage, prime broker, prime brokers, prime brokerage articles, prime bokerage information, information on prime brokerage industry, prime brokerage guide, guide to prime brokerage
PrimeBrokerageGuide.com is the only website focused on providing educational content focused exclusively on the topic of prime brokerage. The website was started in early 2008 and now contains hundreds of industry articles and resources. Below please find a list of the top 20 most popular articles now posted to this niche website:
Tags: Prime Brokerage, prime broker, prime brokers, prime brokerage articles, prime bokerage information, information on prime brokerage industry, prime brokerage guide, guide to prime brokerage
PrimeBrokerageGuide.com is the only website focused on providing educational content focused exclusively on the topic of prime brokerage. The website was started in early 2008 and now contains hundreds of industry articles and resources. If you are looking to work within the area of prime brokerage we would strongly recommend that you first read through 30-40 articles on this website.
Below please find a list of the top 20 most popular articles now posted to this niche website:
Tags: Prime Brokerage, prime broker, prime brokers, prime brokerage articles, prime bokerage information, information on prime brokerage industry, prime brokerage guide, guide to prime brokerage
About 7 weeks ago I wrote up a small article for the TAAAPs newsletter. To read the full newsletter please click here. Please see below for the full article that I wrote for TAAAps:
Over the last two years the mainstream media’s and general public’s interest in prime brokerage has rapidly grown. This is due to a number of factors including the struggle and failure of many investment banks offering prime brokerage services, mergers within
the industry, and widespread failures and redemption notices of hedge funds themselves.
The top three trends affecting the prime brokerage industry right now are multi-prime brokerage relationships, limiting capital introduction services, and prime brokers acting as business partners to hedge fund managers.
Multi-prime brokerage relationships had been used in the past by $5B+ hedge funds whose large institutional clients demanded the practice as a risk management technique. In the past this was almost thought of as unnecessary as no large investment banks offering prime services had collapsed. It was seen in the same light as a major economic superpower defaulting on its own investment notes. In 2008 everything changed, Lehman failed and many investment banks struggled or sold off their prime brokerage services to other firms. This has lead to widespread migrations between prime brokerage service providers and a trend towards managing multiprime brokerage relationships for funds with over $500M in assets or even lower. Some funds as small as $5M are choosing to work with more than one prime brokerage firm from the very start to reduce their exposure to individual firm risk. A few firms have reported shutting down due to assets being locked up within Lehman Brothers when they collapsed earlier this year.
Anyone offering capital introduction services lately has faced the increased challenges of investors sitting on cash, a poor market and overall industry performance, along with increasingly frequent reports of hedge fund fraud. Prime brokerage firms are not as
heavily affected by this as would most independent hedge fund marketers, which are often referred to as third party marketers. A mitigating factor being that prime brokers often take on and attempt to service more clients. This had led to more selective capital
introduction service offerings by prime brokerage firms and more frequent partnerships between prime brokerage firms and third party marketers in the industry.
The third major trend affecting the prime brokerage business is that more firms in the space are positioning themselves as business partners. This is due to the commoditized nature of the industry and high level of competition for new business. Prime brokerage firms are now publishing white papers, offering business plan and marketing plan startup tools, and holding workshops and networking events to help hedge fund managers connect with additional business partners and investors.
Richard Wilson is a relationship manager at Saratoga Prime Services and the author of both PrimeBrokerageGuide.com and HedgeFundBlogger.com.
Tags: Prime Brokerage Article, Prime Brokerage Trends, Prime Broker, Prime Brokerage, Prime Brokerage Legal, Prime Brokerage Revenue, Prime Broker Trends, Top prime brokers
About 7 weeks ago I wrote up a small article for the TAAAPs newsletter. To read the full newsletter please click here. Please see below for the full article that I wrote for TAAAps:
Over the last two years the mainstream media’s and general public’s interest in prime brokerage has rapidly grown. This is due to a number of factors including the struggle and failure of many investment banks offering prime brokerage services, mergers within
the industry, and widespread failures and redemption notices of hedge funds themselves.
The top three trends affecting the prime brokerage industry right now are multi-prime brokerage relationships, limiting capital introduction services, and prime brokers acting as business partners to hedge fund managers.
Multi-prime brokerage relationships had been used in the past by $5B+ hedge funds whose large institutional clients demanded the practice as a risk management technique. In the past this was almost thought of as unnecessary as no large investment banks offering prime services had collapsed. It was seen in the same light as a major economic superpower defaulting on its own investment notes. In 2008 everything changed, Lehman failed and many investment banks struggled or sold off their prime brokerage services to other firms. This has lead to widespread migrations between prime brokerage service providers and a trend towards managing multiprime brokerage relationships for funds with over $500M in assets or even lower. Some funds as small as $5M are choosing to work with more than one prime brokerage firm from the very start to reduce their exposure to individual firm risk. A few firms have reported shutting down due to assets being locked up within Lehman Brothers when they collapsed earlier this year.
Anyone offering capital introduction services lately has faced the increased challenges of investors sitting on cash, a poor market and overall industry performance, along with increasingly frequent reports of hedge fund fraud. Prime brokerage firms are not as
heavily affected by this as would most independent hedge fund marketers, which are often referred to as third party marketers. A mitigating factor being that prime brokers often take on and attempt to service more clients. This had led to more selective capital
introduction service offerings by prime brokerage firms and more frequent partnerships between prime brokerage firms and third party marketers in the industry.
The third major trend affecting the prime brokerage business is that more firms in the space are positioning themselves as business partners. This is due to the commoditized nature of the industry and high level of competition for new business. Prime brokerage firms are now publishing white papers, offering business plan and marketing plan startup tools, and holding workshops and networking events to help hedge fund managers connect with additional business partners and investors.
Richard Wilson is a relationship manager at Saratoga Prime Services and the author of both PrimeBrokerageGuide.com and HedgeFundBlogger.com.
Tags: Prime Brokerage Article, Prime Brokerage Trends, Prime Broker, Prime Brokerage, Prime Brokerage Legal, Prime Brokerage Revenue, Prime Broker Trends, Top prime brokers