Hedge Fund Fees Prime Brokers
Hedge Fund Fees to Prime Brokers Fall From Previous Years
Prime brokerage businesses aren't bringing in the high revenue that they used to from hedge funds, according to a recent survey. Global Custodian, the magazine that conducted the survey, found that investment banks and broker-dealers gathered about $10 million from hedge funds, about a third below historical norms.
"Assets under management have risen substantially in the last year, yet both investment returns and the appetite for risk--as measured by leverage and appetite to borrow stock to cover short sales --remain suppressed by comparison with the years prior to the financial crisis of 2007-09," said Global Custodian, a magazine.
The magazine's annual survey, based on more than 3,100 hedge funds, assumed that hedge funds in total manage $2 trillion in assets globally. The survey also made the assumption that financial conditions led to a narrowing of the fees on prime brokers' sources of income, such as margin finance and stock loans, to 40 basis points from 50.
May was brutal for hedge funds, with wild swings in the currency and commodities markets during the month. The average fund lost 1.2% during the month, according to Hedge Fund Research.
"Macro uncertainties have kept leverage fairly low" for hedge funds, said Barry Bausano, Deutsche Bank AG's (DB, DBK.XE) co-head of global prime finance and head of equities for the Americas. "Hedge funds have had a bad six weeks in performance, and that will likely cause them to be cautious during the summer," but Bausano expected strong third-quarter earnings would revive the market. Source
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