If you’ve talked to a hedge fund manager for any amount of time, the topic of prime brokers will come up. One of the fundamental issues when setting up a hedge fund is finding a prime broker who will fit your balance of price vs. services rendered.
Earlier in the month Alex Thompson wrote an insightful article on Mini Primes and Hedge funds.
In the world of prime brokerage, there are the Goldman’s, the Morgan Stanley’s, and the JP Morgan’s, and then there is everyone else. The big boys of the prime brokerage world offer the best of trading platforms and great customer service, if your hedge fund is big enough for them to turn a profit on your account. Hedge funds under $100 million in assets might have a hard time getting Goldman Sachs on the phone. Even if that fund was able to get into the Goldman customer book, what kind of servicing do you think they could expect?
Alex goes on to answer the following important questions regarding your prime brokerage relationship and specifically when is the right time for your hedge fund to use a mini prime.
- Why Use a Mini Prime
- Benefits of Mini Prime Brokers
- How to Choose a Mini Prime Broker
The conclusion which is drawn is that if you choose to use a mini prime you should either get better pricing or better services. If you don’t get one or preferably both, then keep shopping!