Goldman Sachs Prime Brokerage
Goldman Sachs Prime Brokerage Cutting Clients
(http://HedgeFundBlogger.com) Great piece here by the FT about how Goldman Sachs is booting some of their hedge fund clients off of their platform. This opens the doors again for independent or mini prime brokerage shops to pick up the pieces left behind by larger operations such as Goldman. In the last 9 months there has been more prime brokerage account closing, creating and multi-priming than there was over the previous 3 years. Here is the story excerpt:
Goldman Sachs is cutting back the number of its hedge fund clients in an indication of tougher market conditions and of the changes sweeping through what was once the premier investment bank.
"Their ability to leverage themselves has been affected by their new reiteration," says George Kellner, founder of hedge fund Kellner, DiLeo. "They are reviewing many of their relationships."
That review is especially intensive for hedge funds pursuing strategies that involve trading securities that aren't very liquid, such as convertible bonds, or that rely on the massive use of borrowed money, such as the computer-driven strategies that seek to profit from small price discrepancies.
During the bull market, such strategies appeared liquid and borrowing was cheap. But in recent months, prime brokers raised the cost of funding and many hedge funds were forced to sell convertible and junk-rated bonds that dealers can't readily lend. Such securities have become "dead-end collateral" in Wall Street parlance. Read more...