Prime Brokerage Suite of Services Expanding

Prime Brokerage Suite of Services Expanding

Below is are a few excerpts from a recent article by IDD on the revolution of the prime brokerage business.

Prime brokers are an attractive bet to firms like Sequoia -- which made its investment through the Sequoia Capital U.S. Growth Fund, with nearly $900 million under management -- because they are an integral part of a hedge fund's business. They provide the lending, clearing and settlement services that hedge fund managers rely on. Increasingly, however, prime brokers' stock has risen in value as they bend with the changes hedge funds are experiencing.

In some cases prime brokers are expanding their role and realigning their business models to compensate for the decline in profits tied to the smaller pools of assets that hedge funds are managing. Just this week, for example, the industry lost another $3 billion when the Pequot Capital Management hedge fund revealed that it was winding down its funds and closing its doors in response to an investigation involving insider trading.

"Prime brokers are pulling back on capital introduction, consulting and financing. There are hedge fund clients looking for solutions, things they used to turn to that are not available anymore," says Dailey. Prime brokers have also done away with supplying shared office space to hedge funds, a common practice in which 20 to 30 hedge funds shared quarters to save on expenses; it was begun in the '80s at Furman Selz." Read more...

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Tags: Prime Brokerage Services, prime brokerage hedge fund services, suite of prime brokerage services, expanding prime broker services, prime broker, prime brokerage

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