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One stop shop for hedge funds
19 December 2006
Hedge funds are faster and more demanding than
ever before, and prime brokers need to service them
at speed. To keep up with their clients, the brokers
are changing their business model. Craig MacDonald tracks
the prime brokers that are leading the race and analyses
what hedge funds really want from their broker.
Over the past five years, the prime brokerage business has been changing. In an effort to keep up with its clients – the hedge funds – the business has had to bundle its services to make a type of one-stop shop, merging the fixed-income and equity desks. Some 40% of hedge funds now have significant overlap in their portfolios between fixed income and equities. And for most of the bigger funds, the percentage is even higher.
These multi-strategy hedge funds don't want to go from desk to desk to get their needs addressed; they want one point of contact with the specialisation to service them. For example, a hedge fund may wish to repo out its corporate or convertible bonds because it is attracted to the repo pricing, but it may not be set up to enter into a repo and would prefer to finance it within prime brokerage.
What is needed...
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