BNP Paribas Prime Bokerage

BNP Paribas Prime Brokerage Services – Notes

Here are a collection of publicly available stories on BNP Paribas SA prime brokerage services:

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Resource #1: (11.16.08) BNP Paribas SA, France’s biggest bank, won prime brokerage business in Asia with hedge fund CQS (U.K.) LLP as it seeks to lure clients in the region from rivals.

The new contract with CQS, a London-based hedge fund manager that has an office in Hong Kong and oversees about $7.5 billion, adds to BNP Paribas’s existing relationships with major hedge funds in the region, according to Talbot Stark, global head of BNP Paribas hedge fund relationships. He declined to name other existing clients.

“We have prime brokerage relationships with three or four of the market leaders in Asia that are outperforming their peers and look to be longer-term survivors in the Asian hedge fund market,” Stark, 43, said in a telephone interview yesterday. “We’re in discussions with several other key players that are making decisions to change their prime brokerage providers and are seeking alternative providers that are established and committed to the region.”

Commercial banks such as BNP are seeking to win customers from established players in the hedge fund market after the collapse of Lehman Brothers Holdings Inc. and Bear Stearns Cos. rattled confidence in securities firms. Goldman Sachs Group Inc. and Morgan Stanley were ranked by a Westborough, Massachusetts- based Tabb Group LLC report in May as the two biggest prime brokers worldwide.

Prime brokerages offer hedge funds services such as clearing, custody, securities lending and financing for assets. They also introduce fund managers to investors. Source
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Resource #2: BNP Paribas SA, France’s biggest bank, said it got a “flood” of clients at its prime brokerage since Lehman Brothers Holdings Inc. filed for bankruptcy on Sept. 15.

BNP Paribas expanded its services for hedge funds in June, when it bought Bank of America Corp.’s prime brokerage unit. The unit provides record-keeping, securities lending and secured financing to more than 500 hedge funds and has 320 employees, the company said.

“That acquisition now looks timely in these markets as people are in the middle of a flight to quality,” said Talbot Stark, global head of BNP Paribas hedge fund relationships, in an interview today. “Foremost on people’s minds is ensuring that wherever they decide to put assets, they will be secure.”

Lehman won’t return “billions” of frozen prime-brokerage assets “in the short term,” Stephen Pearson, a partner at PricewaterhouseCoopers, administrator for the Lehman bankruptcy, said yesterday. GLG Partners Inc., the $24 billion hedge fund that started as a unit of Lehman 13 years ago, this week said some “residual” trades with Lehman didn’t clear before it filed the biggest bankruptcy in history.

While Stark wouldn’t specify how much money hedge funds have moved to BNP Paribas, he said the company is now taking only 24 hours to sign complex prime brokerage agreements that used to take as long as three months to negotiate. Read more…

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Resource #3:

The FINANCIAL — BNP Paribas is pleased to announce it has completed the acquisition of Bank of America’s equity prime brokerage business.

The equity prime brokerage business rovides a wide range of services to hedge funds and mutual funds. We believe it is a low risk, low capital consumption, service oriented business.

The deal, announced on June 10 of this year, brings more than 500 clients and over 300 employees to BNP Paribas Corporate and Investment Banking. The transaction involves the transfer of client relationships, employees and technology systems.

Yann Gerardin, Global Head of Equity and Commodity Derivatives, said: “The strategic fit of this acquisition is excellent. Combining the Bank of America prime brokerage business with our global platform and leading derivatives business creates a prime brokerage business of choice. It is an important advantage for clients to partner with a bank like BNP Paribas , with a AA+ credit rating and global reach”.

Todd Steinberg, Head of Equity and Commodity Derivatives for the Americas, said: “We are thrilled the deal has closed on schedule. Our goal was to move the business over seamlessly for clients and employees and we have achieved this. “

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Citigroup Prime Brokerage

Citigroup Prime Brokerage Services – Notes

Here are a collection of publicly available articles related to Citigroup prime brokerage:

Resource #1: (6.24.09) 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. source

Resource #2 (2.4.09) Citigroup’s Andrew Hill, who currently co-heads the firms prime brokerage sales business in Japan, is being relocated to Singapore, a Citigroup spokesperson confirmed to IDD.

In his new role, Hill will work towards building the roster of hedge fund clients in Southeast Asia and India. He will also oversee Citi’s US prime brokerage business, and will continue to oversee prime finance sales for Japan.

Hill’s specific focus will be on equity and fixed income prime brokerage. He will work alongside Alex Knight, who oversees the foreign exchange prime brokerage business for Citi in Asia. source

Resource #3: (12.6.08) Citigroup has reportedly cut 15% of its Citi Prime Finance staff, including 14 members of its New York office. Five of those took severance packages; the rest were laid off.

As part of the downsizing, Citi’s prime brokerage group will no longer offer business consultancy services to hedge funds, Hedge Fund Alert reports. It remains committed to other services including clearing, securities lending, capital introduction and execution. source

Resource #4: Scores of big hedge funds have been shifting billions of dollars in prime brokerage business away from Morgan Stanley and Goldman Sachs to operations housed in large commercial banks, in what is being viewed as a massive flight to safety, write Greg Farrell and Henny Sender in New York .

Traders at JPMorgan Chase, Citigroup, Deutsche Bank and Credit Suisse are among those who describe themselves as “inundated” with business from hedge fund managers moving their trading and execution away from the last two remaining independent investment banks.

In recent weeks, prime brokerage business had been migrating away from Lehman Brothers, as the market perception of that firm began to worsen.

But after Lehman’s collapse into bankruptcy protection on Monday, along with Merrill Lynch’s decision to be acquired by Bank of America, the gradual ebb of prime brokerage business away from the independents rose to a flood.

APG, manager of Europe’s biggest pension fund, said: “We have stopped stock lending in several American, but also European, banks whose shares face the most downward pressure, among others, from short-sellers.” Read more…

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Prime Brokerage Boston

Prime Brokerage Boston – Meeting Notes

Yesterday I had a lunch meeting with two prime brokerage professionals in downtown Boston and the conversation quickly turned to the high demand for cap intro services for hedge funds.

The main problem with capital introductions being made by prime brokerage firms is that many hedge funds are not competitive enough to market. Many managers with negative or sub-par performance would still like to grow their business but the fact is most investors won’t consider hedge fund managers who are both relatively small and have mediocre or poor performance, there is nothing engaging enough that will convince investors to look past those two facts, they hear hundreds of stories and see as many teams pitching their outlook on the markets each year.

This leaves prime brokerage firms with two choices – offer capital introduction services knowing that there is almost no chance of raising assets or tell the hedge fund manager that they will not be able to market their strategy. The best prime brokers will often help with pre-marketing activities such as operational and risk assessments, marketing material scrubbing, newsletter development, etc.

This may seem straightforward but it is often an unsaid thorn in the side of prime brokerage firms offering capital introductions for hedge fund managers. They want to provide this service to everyone possible but by nature only 10-25% of all clients really qualify for the service.

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Prime Broker Survey

Prime Broker Survey Results

A new survey shows that more than one-third of hedge fund and CTA managers are dissatisfied with their prime brokers. The most notable dissatisfaction is with the prime brokers’ personal service. In 2007 80% of funds rated the personal service of their prime brokers as either “good” or “excellent”, this year only 63% gave their prime brokers high marks. This may be a result of the liquidity crisis, which 16% of the managers said negatively effected the relationship with their prime broker.

The survey also shows that many funds are happy with the cost of their prime brokers, with only 7% responding “poor”. However, a considerable 38% of managers rating their prime brokers as “poor” performers of capital introduction. Funds who consider themselves technologically advanced are the most satisfied with their prime brokers.

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More prime brokerage firms are adding on administration services to help attract and retain clients. I wasn’t sure how widespread of a trend this was but saw this mentioned within an article yesterday as noted below. I would be interested in discussing this further with hedge fund managers reading this article – if you have some insight – Richard@HedgeFundGroup.org.
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In recent years, the custodian banks that have acquired hedge fund administrators have sought to adjust client lists in favor of larger and more profitable hedge fund and fund of funds groups interested in a broader array of services. At the same time, prime brokers have recognized that providing administration services can help attract and retain clients and counter the shift among hedge fund managers towards multiple prime brokerage.

“It would be surprising if the hedge fund administration industry continues to support such a large number of providers, and there is now evidence that a renewed round of consolidation is in the offing,” says Dominic Hobson. “However, the appetite to sell may be offset as well as encouraged by the depressed prices available. In any event, the buyers are likely to be different from the banks which dominated the acquisition process in the early years of this century.” Read more…

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Tags: Prime Brokerage and Hedge Fund Administration Services, Prime Broker offering administration services, administration services from prime brokerage firms, which prime brokerage firms offer hedge fund administration services

More prime brokerage firms are adding on administration services to help attract and retain clients. I wasn’t sure how widespread of a trend this was but saw this mentioned within an article yesterday as noted below.
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In recent years, the custodian banks that have acquired hedge fund administrators have sought to adjust client lists in favor of larger and more profitable hedge fund and fund of funds groups interested in a broader array of services. At the same time, prime brokers have recognized that providing administration services can help attract and retain clients and counter the shift among hedge fund managers towards multiple prime brokerage.

“It would be surprising if the hedge fund administration industry continues to support such a large number of providers, and there is now evidence that a renewed round of consolidation is in the offing,” says Dominic Hobson. “However, the appetite to sell may be offset as well as encouraged by the depressed prices available. In any event, the buyers are likely to be different from the banks which dominated the acquisition process in the early years of this century.” Read more…

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Tags: Prime Brokerage and Hedge Fund Administration Services, Prime Broker offering administration services, administration services from prime brokerage firms, which prime brokerage firms offer hedge fund administration services

Quick Link: List of Hedge Fund Prime Brokers

Here is an interesting article about the growth of prime brokerage services in Asia. I didn’t know that growth was so strong for these groups right now…

Citigroup expects the amount of assets serviced by its Asia Pacific prime brokerage arm to grow by more than 30 percent annually over the next three to five years, as more global hedge funds set up shop in the region.

Even with tumbling stock markets hammering Asia’s hedge fund industry, many large international managers are doing more business in the region, drawn by its long-term potential, said Hannah Goodwin, head of Prime Finance, Asia Pacific for the U.S. banking giant.

“We’re looking at a 30 to 50 percent growth every year,” she told Reuters in an interview. “That’s how aggressive we want to be with this business and how well we think this business is going to develop for us.” Read more…

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Tags: Prime Brokerage in Asia, Asian Prime Broker, Singapore, Hong Kong, Beijing, Shanghai, China, Japan, Tokyo, Asia Prime Brokerage Services

Here is an interesting article about the growth of prime brokerage services in Asia. I didn’t know that growth was so strong for these groups right now…

Citigroup expects the amount of assets serviced by its Asia Pacific prime brokerage arm to grow by more than 30 percent annually over the next three to five years, as more global hedge funds set up shop in the region.

Even with tumbling stock markets hammering Asia’s hedge fund industry, many large international managers are doing more business in the region, drawn by its long-term potential, said Hannah Goodwin, head of Prime Finance, Asia Pacific for the U.S. banking giant.

“We’re looking at a 30 to 50 percent growth every year,” she told Reuters in an interview. “That’s how aggressive we want to be with this business and how well we think this business is going to develop for us.” Read more…

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Tags: Prime Brokerage in Asia, Asian Prime Broker, Singapore, Hong Kong, Beijing, Shanghai, China, Japan, Tokyo, Asia Prime Brokerage Services

Below are a series of resources related to Morgan Stanley’s Prime Brokerage business source

Resource #1: (7.5.09) What are Morgan Stanley’s intentions in the prime brokerage model? Well, fairly or not, the perception has developed as of late that it was seeking a new business model that relied less on leverage and anything seen as risky. Many assumed it wanted to ratchet back in prime brokerage, after having long ruled the roost with Goldman Sachs, but that may not be true. source

Resource #2 (5.22.09) Morgan Stanley replaced its top prime-brokerage official, underscoring big changes in the way investment banks are serving hedge-fund clients.

Stuart Hendel, who managed the New York firm’s prime-brokerage business since 2007, “has decided to leave the firm to pursue outside interests,” according to an internal memo released by Morgan Stanley on Thursday.

Mr. Hendel is being succeeded by Alex Ehrlich, who had been global head of prime services at UBS AG for the past six years. source

Resource #3: (4.3.09) U.S. prime brokerage business, Patrick Mortimer, resigned this week, The Wall Street Journal reported Wednesday. Mortimer left for personal reasons and no direct replacement is planned, according to the newspaper, which sourced people familiar with the matter

Resource #4: (11.17.08) Kurt Baker, the head of Morgan Stanley’s (MS) prime brokerage in Asia, is leaving the firm, a company spokesman confirmed Wednesday, but declined to comment further.
Baker’s departure comes a week after Morgan Stanley confirmed additional worldwide job cuts. It said it would reduce 10% of its staff in institutional securities, which includes prime brokerage, as well as 9% in asset management, which manages mutual funds and other investment instruments.

The firm has already cut about 10% of its work force this year. Since June 2007, the bank has cut around 4,500 employees, bringing its total staff to about 46,500 as of Aug. 31, 2008.
Morgan Stanley’s prime brokerage, one of the two largest in the Asia, has been hurt by a worldwide hedge-fund slump.

The hedge-fund industry has been struggling against trailing performance and a rising tide of redemptions. In Asia, the hedge-fund industry has been especially vulnerable to a focus on stocks and a tendency to go long. The Eurekahedge Asian Hedge Fund Index is down 21.6% so far this year.

Morgan Stanley’s prime brokerage operations, in particular, were hit after Lehman Brothers Holdings Inc. filed for bankruptcy protection in mid-September. Concerns about the stability of investment banks caused some hedge-fund clients to move assets. Source
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Resource #5: Stu Hendel will rejoin the Firm as Global Head of Prime Brokerage. He will be based in New York and report to Rich Portogallo, Head of the U.S. Equity Division and Global Equity Financing Services.

In this role, Mr. Hendel, 48, will oversee the Firm’s global prime brokerage business focusing on growing Morgan Stanley’s market leading franchise and meeting the evolving needs of clients. Mr. Hendel will also work closely with senior management in the Equities and Fixed Income divisions on defining and executing strategic direction for the group.

“We are delighted that Stu Hendel has chosen to return to Morgan Stanley,” said Jerker Johansson, Global Head of Equities and Co-Head of Institutional Sales and Trading at Morgan Stanley. “Stu had been instrumental in helping to build our prime brokerage business into the recognized market leader today. His experience and skill make him perfectly suited to continue our momentum in this business.”

Mr. Hendel rejoins Morgan Stanley from Eton Park, where he served as the Chief Operating Officer since that firm was organized in 2004.

“Stu’s innovation, content, passion and recent experience at one of the world’s most respected alternative investment firms will only further serve to reinforce our commitment to our clients and our staff,” said Rich Portogallo. “We are thrilled to have him back.”

Prior to joining Eton Park, Mr. Hendel spent 15 years at Morgan Stanley. He held a number of senior management positions in Prime Brokerage from 1993 to 2004, most recently serving as Co-Head of U.S. Prime Brokerage. Prior to that, Mr. Hendel worked in the legal division of Morgan Stanley from 1989 to 1993. Mr. Hendel received his J.D. from Cornell Law School 1983 where he served as business manager of the Law Review. He graduated from Wesleyan University in 1980. Mr. Hendel will rejoin Morgan Stanley in early 2007.

Tags: Morgan Stanley Prime Broker, Morgan Stanley Prime Brokerage Services, Prime Brokerage Services by Morgan Stanely

Active Account

Active Account Glossary Definition

An active account is a brokerage account that makes many transactions. Some brokerage firms charge a fee to accounts that are less active. This is a way for brokerage firms to make money on accounts that otherwise would not generate revenues.

Read dozens of additional articles like this within the guide to Hedge Fund Terms.

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Quick Link: List of Hedge Fund Prime Brokers

FinAlternatives recently completed a great prime brokerage survey/report where they discussed how the highly-publicized hedge fund blowups, the Bear Stearnes collapse and the mortgage crisis have forced the prime brokerage industry to adapt more diligence in hedge funds’ risk exposure and leverage. Institutional investors are increasingly demanding hedge funds to have greater transparency, and hedge funds have passed much of this responsibility to prime brokers. Hedge funds are now employing multiple prime brokers and are more demanding of the services the brokers offer.

Many of the larger hedge funds hoping to minimize exposure are moving fully-paid assets from prime brokers to banks. The larger hedge funds cut third-party risk by financing long positions exclusively through a bank. On the other hand, smaller and mid-size hedge funds are struggling to secure lending and prime brokers. It is especially difficult for small single-strategy hedge funds to find a prime broker, as prime brokers favor the diversified multi-strategy funds.

Recent turbulence in the hedge fund industry has led investors to demand greater transparency of managers. Managers have relayed this responsibility to prime brokers, who have evolved to provide improved risk analytics and add more services to their clients.

- Richard

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I recently read a short article about the prime brokerage business in Asia through FinAlternative’s prime brokerage survey. While many local markets have been recently hurt performance-wise Asia has a vastly expanding hedge fund industry, and prime brokerages are bolstering their capacity in Asia by buying up talented executives from the top firms.

Major firms like Merrill Lynch and Morgan Stanley have struggled to retain their top executives in Asia from rival prime brokerages. Goldman Sachs now claims five managing directors of its Asian prime brokerage division, and has plans to have another series of major hiring. Asia, being the fastest growing hedge funds market, has become more and more important for successful prime brokerages.

A growing number of Hedge Fund Group (HFG) members have been expressing an interest in learning more about hedge funds in Asia, hedge fund jobs in Asia and ways to seek exposure to new investor markets within that region of the world. If you have any white papers or PowerPoints on this topic and don’t mind sharing them please send them over. Thanks in advance.

- Richard

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Prime Brokerage Asia

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Prime Brokerage Business

Prime Brokerage Business Update

Quick Link: Example Prime Brokers

I just read a recent report from Finalternatives on the prime brokerage business. This report mentioned that prime brokerage firms expect $11 billion in hedge fund revenues this year, consequently major prime brokerages are vigorously competing for clients. JPMorgan and CitiGroup are playing catch-up with industry giants by bolstering their prime brokerage units. Meanwhile, the more established Deutsche Bank, Morgan Stanley, Merrill Lynch and Goldman Sachs are battling for dominance over the prime brokerage industry.

Last year, Morgan Stanley was the world’s largest prime broker holding $152.8 billion in assets under management from 455 funds. However, a major international survey showed that size isn’t everything. Deutsche Bank took first place, followed by Merrill Lynch and Morgan Stanley finished third. Morgan Stanley fares better with U.S. hedge funds, 59% reported having “a strong relationship” with the firm, while only 15% said that of Deutsche Bank.

The two biggest prime brokers, Goldman Sachs and Morgan Stanley, are building their reputation as the best in the industry. More and more hedge funds turn to the two firms because they have a strong reputation, as well as superior technology and support capabilities. While other major firms try to catch up by buying up talent from rivals, Morgan Stanley and Goldman Sachs are securing their dominant positions in prime brokerage.

- Richard

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CHP Designation

Certified Hedge Fund Professional (CHP) Designation

Last week the Hedge Fund Group (HFG) began to offer the Certified Hedge Fund Professional (CHP). The CHP Program is a two part designation. Level 1 ensures that participants have mastered a broad foundation of hedge fund industry knowledge across 6 learning modules. Level 2 allows participants to specialize in a niche area of their choice such as due diligence, prime brokerage or marketing, sales and investor relations. The program is now open for registration to 100 participants after which point it will close to new entrants for 6 months while the website and FAQ related resources are improved.

To learn more about the Certified Hedge Fund Professional (CHP) designation please see the following links:

• CHP Frequently Asked Questions Guide
  
• CHP Study Guide
  
• CHP Program Overview
• CHP Program Registration

The Hedge Fund Group (HFG) has recently passed the 9,000 member mark and while we continue to be tied to the Linkedin.com platform we are beginning to plan on-site networking events this winter and hope to add 50 additional hedge funds to our board of advisers over the next year. As always HFG membership is free, sign up today at http://hedgefundgroup.org.

CHP Designation

Certified Hedge Fund Professional (CHP) Designation

Last week the Hedge Fund Group (HFG) began to offer the Certified Hedge Fund Professional (CHP) Designation. The CHP Program is a two part designation. Level 1 ensures that participants have mastered a broad foundation of hedge fund industry knowledge across 6 learning modules. Level 2 allows participants to specialize in a niche area of their choice such as due diligence, prime brokerage or marketing, sales and investor relations. The program is now open for registration to 100 participants after which point it will close to new entrants for 6 months while the website and FAQ related resources are improved.

To learn more about the Chartered Hedge Fund Associate (CHP) designation please see the following links:

• CHP Frequently Asked Questions Guide
  
• CHP Study Guide
  
• CHP Program Overview
• CHP Program Registration

The Hedge Fund Group (HFG) has recently passed the 9,000 member mark and while we continue to be tied to the Linkedin.com platform we are beginning to plan on-site networking events this winter and hope to add 50 additional hedge funds to our board of advisers over the next year. As always HFG membership is free, sign up today at http://hedgefundgroup.org.

Permanent Link: Certified Hedge Fund Professional (CHP) Designation

Hedge Fund Licenses

Hedge Fund Marketing License Question

Our team received this question via email this weekend:

“What license(s) are needed to market hedge funds as a third party marketer?”

Our answer:

We cannot provide legal/financial advice at all via email but I do know that some of us are required to hold our Series 7 and Series 63 to perform this type of sales work – this will probably vary based on your CCO or sponsoring broker-dealer. I believe part of this answer might also depend on the types of funds you represent. Hope this helps.

As noted within the answer above this is no form of compliance or regulatory advice, just an example of what licenses some third party marketers are being required to hold.

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Prime Brokerage Sales

Prime Brokerage Sales Trend

While the credit crisis has hurt most financial firms, some boutique prime brokers have benefited. As hedge funds look out for their best interest, smaller prime brokerage shops are becoming more attractive than the largest firms. As major brokers reduce their less-profitable hedge fund accounts, boutique primes take on these clients. Another opportunity for boutiques is that the big firms are cutting back on staff, making it easy to attract seasoned talent to join the smaller firms. Many of these veterans bring some clients with them too.

The credit crisis has in many ways helped boutique prime brokers, but it has also hurt their capital introduction capabilities. A recent FINalternatives survey revealed that over a third of all hedge funds rated their prime broker’s capital capabilities as “poor”. But the survey also showed that nearly 75% of hedge fund managers that called their prime broker’s personal service “poor” are shopping for a new one. Many average-size funds are not given the attention from big firms that the smaller prime brokers promise; and as long as this neglect continues, boutique prime brokers will thrive.

- Richard

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FINRA Broker Check

FINRA Broker Background Check Tool

Completing due diligence on a registered broker in the hedge fund industry?

FINRA offers investors a free online background check service of FINRA-registered securities firms and brokers. The FINRA BrokerCheck includes search capabilities for both a broker and brokerage firm, online delivery of the report, an explanation to help investors understand the information provided, and links to additional resources. BrokerCheck provides background information on an estimated 677,00 currently registered brokers and almost 5,000 currently registered securities firms. Also listed is an online collection of information about Investment Adviser firms that are regulated by the Securities and Exchange Commission.

- Richard

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Hedge Fund Margin Calls

Hedge Fund Video – Margin Calls & CDOs

A well researched video on hedge funds, margin calls and CDOs. http://www.youtube.com/watch?v=LtcnXLDnXvs

Tired of reading articles? Watch more videos like this one above within the Hedge Fund Videos Directory.

- Richard

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What is Prime Brokerage?

Prime Brokerage Video Explanation

Here is a short video explaining what prime brokerage is, why it is important and how hedge funds rely on prime brokers to conduct day-to-day trading and reporting.

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Quick Link: List of Hedge Fund Prime Brokers

Here is a short video on prime brokerage – http://youtube.com/watch?v=DHTatIV7jns This video video discusses the importance of what prime brokers do and what types of services many prime brokerage firms offer to hedge funds. While the importance and breadth of prime brokerage services expands each year, it can be hard to learn much about them online.

Read dozens of additional articles like this within the guide to Hedge Fund Terms.

- Richard

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1. Hedge Fund Prime Brokers
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5. Capital Introduction
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Tired of reading articles? Watch more videos like this one above within the Hedge Fund Videos Directory.

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This leaves prime brokerage firms with two choices – offer capital introduction services knowing that there is almost no chance of raising assets or tell the hedge fund manager that they will not be able to market their strategy. The best prime brokers will often help with pre-marketing activities such as operational and risk assessments, marketing material scrubbing, newsletter development, etc.

This may seem straightforward but it is often an unsaid thorn in the side of prime brokerage firms offering capital introductions for hedge fund managers. They want to provide this service to everyone possible but by nature only 10-25% of all clients really qualify for the service.

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• Capital introduction services are in higher demand than ever
• The strongest prime brokerage teams aren’t always the most well known or largest in size as they have problems serving all of their clients well
• Service is still a competitive advantage for many prime brokerage firms who are used to working with clients tired of the large prime shops not giving them any service

If you are looking for prime brokerage contacts in Chicago please email Richard@HedgeFundGroup.org.

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If you need prime brokerage contacts in Boston please email me at Richard@HedgeFundGroup.org.

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A quantitative and comprehensive analysis of global prime brokerage firms was presented in the 2007 Lipper HedgeWorld Prime Brokerage League Table. The research shows that the largest prime brokers by total 2006 assets are Morgan Stanley, Bear Stearns, Goldman Sachs, UBS and Credit Suisse.

Surveys by Alpha Magazine indicate that the most important aspect of service in prime brokers was operations, followed by client service, reporting and reporting technology, securities lending, trade execution and trading technology, financing, capital introduction and business consulting. Ranking of the prime brokers in 2007 according to the aforementioned criteria can be found on their webpage.

However, after the financial turbulence in the past six months, “there was likely to be a concentration of prime broking business with a smaller number of large service providers”, said Mehraj Mattoo, global head of Comas, Commerzbank’s fund of hedge funds unit, in an article by David Walker “How many prime brokers will be left?“

There has also been significant brokerage business flow among the remaining prime brokers. Hedge funds that account for about 10 percent of Morgan Stanley’s prime-brokerage balances withdrew their money or told the firm they planned to (bloomberg news). Banks that are taking on new hedge-fund business include JPMorgan (a spokesman confirmed that the bank has seen a significant jump in volume and “they are managing it well.”), Deutsche Bank, BNP Paribas, Credit Suisse and Citigroup (more).

Guest post by Yifei Huang

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