Pittsburgh Post Gazette – In the prime-brokerage business, being the prime choice of hedge funds is becoming more of a challenge.
As hedge funds grow in size, complexity and clout, many investment managers are finding that a single prime broker isn’t enough to meet their expanding list of demands. Prime brokers help hedge funds manage their trades with multiple firms and also provide lending, portfolio reporting and custodial services, among other things.
These days, the term “prime” brokerage is starting to look like something of a misnomer, as more hedge funds are using multiple prime brokers for their trading, borrowing and portfolio-monitoring needs.
Some 56 percent of hedge funds managing more than $1 billion in assets have more than four prime brokers, and half of those, 28 percent of the full group, use seven or more, according to a 2005 survey by the Tabb Group, a financial-markets research and advisory firm. Almost all the smaller funds surveyed had one to three prime brokers.
