Prime Brokerage Q & A
Prime Brokerage Services
Question: What Services do Prime Brokerage Firms Provide?
Answer: I recently found an detailed answer to this question within the Preqin Global Hedge Fund Investor book. Here it is:
Prime brokers provide trading and financing services to hedge funds. Prime brokerage is the common name for the package of services offered by investment banks and securities firms to hedge fund and other investors allowing them to borrow securities and cash to be able to invest on a leveraged basis and achieve an absolute return. The prime broker is able to provide a centralized securities clearing facility for the hedge fund and then benefits by earning fees on financing the client’s long and short cash and security positions and by charging fees for clearing and other services. It also earns money by hypothecating the portfolios of the hedge funds it services.