Multiple Prime Brokers
Challenges of Multiple Prime Brokers
Here is a short excerpt from a recent article by Hedge Fund Review on multiple prime brokerage challenges and costs. This is an issue we have discussed here on HedgeFundBlogger.com and PrimeBrokerageGuide.com a few times in the past. The main benefits of multi-priming pointed out within this article include:
- Broader securities lending offerings
- Competitive financing rates
- Additional market research
- More access to capital introduction resources
- Spreading counterparty risk out over several prime brokers
Historically, most hedge funds with assets greater than $1 billion have operated in a multi-prime environment while smaller funds tend to use a single prime model in order to simplify their operations. Today funds of all sizes are moving to the multi-prime model.To read more about prime brokerage in general please visit http://PrimeBrokerageGuide.com.
This is primarily due to larger funds requiring access to a wide range of products and services that may not be available within a single prime brokerage relationship. Introducing competition and expanding the services available to them has become more important for the long-term success of small funds as well.
Expanding to a multi-prime organisation can result in some additional operational overhead. However, the benefits seen within this model are generally regarded as worth the added effort. Having multiple prime brokerage relationships gives funds access to broader securities lending offerings, competitive financing rates, additional market research and more capital introduction services. read more...